On the edge of downtown, high enough for spectacular Beagle Channel views, HI affiliate Albergue Torre al Sur (Gobernador Paz 1437, tel. 02901/430745, www.torrealsur.com.ar [1], US$7–8 pp) has gotten mixed recent reviews because of overcrowding and noise. Rooms have two or four beds, with lockers; there’s hot water, Internet access, and free luggage storage.
The HI affiliate Albergue Los Cormoranes (Kamshen 788, tel. 02902/423459, US$7–8 pp with breakfast) has attractive common areas, including a wind-sheltered garden, and better sleeping facilities than Torre al Sur. Most easily reached by climbing Don Bosco to its end and then taking a left, it’s eight steep blocks north of the waterfront (arrival transfers are free).
Central but quiet, 
Albergue Cruz del Sur (Deloqui 636, tel. 02901/434099, www.xdelsur.com.ar [2], US$8 pp) is an independent hostel whose rooms have four, six, or eight beds; there is also cable TV, Internet access, two kitchens, and a free initial transfer. The nearby El Refugio del Mochilero (25 de Mayo 241, tel. 02901/436129, www.refugiodelmochilero.netfirms.com [3], US$8 pp) has similar facilities.
Half a block from the Lider bus terminal, Freestyle Backpackers Hostel (Gobernador Paz 866, tel. 02901/432874, www.ushuaiafreestyle.com [4], US$10 pp–US$50 d with breakfast) is a gleaming new purpose-built hostel with a youthful ambience, a spacious lounge and kitchen facilities, and secondary amenities including laundry service and parking. The more expensive rooms are doubles with private baths.
Links:
[1] http://www.torrealsur.com.ar
[2] http://www.xdelsur.com.ar
[3] http://www.refugiodelmochilero.netfirms.com
[4] http://www.ushuaiafreestyle.com