Hamilton, who will start first for the fourth time this season, also beat Lotus' Romain Grosjean, his own teammate Nico Rosberg and Ferrari's Fernando Alonso, who all fell short of his 1min19.388s benchmark. Kimi Räikkönen and Felipe Massa duly followed in sixth and seventh aboard the other Lotus and Ferrari.
Daniel Ricciardo (Toro Rosso) and Sergio Pérez (McLaren) also made it through to the top 10. So did Mark Webber, but the Red Bull driver opted not to set a time, which means he still gets to pick which tire he will start the race on.
All the other drivers in Q3, except Pérez who set his time with the medium compound, will have to start on softs.
Paul di Resta (Force India), who struggled with car set-up, and Esteban Gutierrez (Sauber), with engine trouvles, were the two high profile victims of Q1.
Earlier in the day, Grosjean led the last free practice session, ahead of Alonso and Pérez, as Vettel, only fourth, focused on longer runs. Esteban Gutierrez (Sauber), 18th on the grid, missed the whole session while his mechanics changed his engine.
Qualiyfing results* – Hungarian Grand Prix (Hungaroring)
1.Lewis Hamilton (Mercedes W04) - 1'19"338 - Q3
2.Sebastian Vettel (Red Bull RB9-Renault) - 1'19"426 - Q3
3.Romain Grosjean (Lotus E21-Renault) - 1'19"595 - Q3
4.Nico Rosberg (Mercedes W04) - 1'19"720 - Q3
5.Fernando Alonso (Ferrari F138) - 1'19"791 - Q3
6.Kimi Raikkonen (Lotus E21-Renault) - 1'19"851 - Q3
7.Felipe Massa (Ferrari F138) - 1'19"929 - Q3
8.Daniel Ricciardo (Toro Rosso STR8-Ferrari) - 1'20"641 - Q3
9.Sergio Perez (McLaren MP4/28-Mercedes) - 1'22"938 - Q3
10.Mark Webber (Red Bull RB9-Renault) - no time - Q3
11.Adrian Sutil (Force India VJM06-Mercedes) - 1'20"569 - Q2
12.Nico Hulkenberg (Sauber C32-Ferrari) - 1'20"580 - Q2
13.Jenson Button (McLaren MP4/28-Mercedes) - 1'20"777 - Q2
14.Jean-Eric Vergne (Toro Rosso STR8-Ferrari) - 1'21"029 - Q2
15.Pastor Maldonado (Williams FW35-Renault) - 1'21"133 - QQ2
16.Valtteri Bottas (Williams FW35-Renault) - 1'21"219 - Q2
17.Esteban Gutierrez (Sauber C32-Ferrari) - 1'21"724 - Q1
18.Paul Di Resta (Force India VJM06-Mercedes) - 1'22"043 - Q1
19.Charles Pic (Caterham CT03-Renault) - 1'23"007 - Q1
20.Giedo Van der Garde (Caterham CT03-Renault) - 1'23"333 - Q1
21.Jules Bianchi (Marussia MR02-Cosworth) - 1'23"787 - Q1
22.Max Chilton (Marussia MR02-Cosworth) - 1'23"997 - Q1