Hughes completes signing of Dembele for Fulham
Birmingham City had been hoping to bring in the 23-year-old, but have been beaten to the punch by their Premier League rivals.
Dembele, who had spent the past four seasons in Holland with AZ, is looking forward to making an impact at Craven Cottage.
"I am very happy to join Fulham and look forward to training with the team to prepare for the first home game of the season," Dembele told the club's official website.
"It has always been a dream to play in the Premier League and I will make sure that I make the most of this opportunity.
"I understand that Fulham has a strong squad, so I am prepared to work hard for the manager and take my chance to impress him, and my team-mates, when the opportunities arise."
"It is important that we go into the season with some additions to the squad that will add strength and depth to enable us to compete at a consistently high level throughout the season.
"Moussa is strong and quick and will add another dimension to our attacking options, which is important for us.
"I look forward to working with him, and to hopefully a few more additions before the window closes."