Hughes has been keeping tabs on the Paraguayan forward for almost the entire season as Santa Cruz continues to struggle to break into the first team at Eastlands under Roberto Mancini.
Santa Cruz joined City for £17.5m from Blackburn Rovers, both clubs Hughes has managed, last summer, but Fulham will be hoping to sign the striker for a fraction of that.
Mancini is set to lose a number of his forwards next year, despite convincing Carlos Tevez to stay at the club.
Emmanuel Adebayor appears destined to leave the club, potentially on loan, in the new year, while Craig Bellamy is unlikely to return from his spell at Cardiff City.
Manchester City have been linked to a number of high-profile forwards as replacements, but Mancini may well miss out on Wolfsburg hitman Edin Dzeko, with Chelsea said to be closing in on the Bosnian striker.