After his spell in Wolverhampton, Paatelainen decided to return to Scotland in the summer of 1998; this time signing for Edinburgh club Hibernian. Hibs had been relegated the previous season, and Paatelainen's twelve goals in his first season helped his side get promotion back to the top division in Scotland. He is fondly remembered by Hibernian supporters for his hat-trick in a 6–2 victory over Edinburgh derby rivals Heart of Midlothian on 22 October 2000. Paatelainien's appearance for Hibs in their 2001 Scottish Cup Final defeat by Celtic meant that he became the first player to play in the Scottish Cup final with three different clubs. Despite this, Paatelainien never collected a winners medal in the competition. Paatelainen left Hibs in 2001 to sign for French club Strasbourg. He then returned to Hibs for one season, where he combined his playing duties with coaching the youths.