Hylton turned down a new contract with Oxford to sign for League Two club Luton Town on a two-year contract on 31 May 2016. He scored the opening goal on his debut in Luton's 3–0 win away to Plymouth Argyle on the opening day of 2016–17. Hylton scored a hat-trick for Luton in a 4–1 win at home to Wycombe Wanderers on 3 September, which saw him earn a place in the English Football League Team of the Week. He scored twice from the penalty spot for Luton in a 3–1 victory away to Exeter City in the FA Cup first round, ensuring their progression to the second round. Hylton signed a contract extension with Luton on 12 January 2017 until June 2019, with the prospect of a further extension until 2020, having scored 14 goals from 26 appearances up to that point in 2016–17. He scored twice during a home match against Crawley Town on 11 February, the first coming in the 70th minute and the second coming in the 76th minute, which made the score 2–1 to Luton, and was once again named in the English Football League Team of the Week. Hylton was named the PFA Fans' League Two Player of the Month for February 2017, during which he scored four goals in five league appearances. His performances for Luton saw him named in the PFA League Two Team of the Year, as well as being named Luton Town Player of the Season, voted for by the club's supporters. Hylton played in both legs of Luton's play-off semi-final defeat to Blackpool, which finished 6–5 on aggregate, and scored a penalty in the 3–3 home draw in the second leg. He finished the season with 47 appearances and 27 goals.