Since last year, Paatelainen has coached the Scottish club Kilmarnock, bringing about a reversal in their fortunes.
On Thursday, the Finnish Football Association announced that he has signed a five-year contract with the national team, which extends through the Euro 2016 qualifiers.
He told YLE News the decision to come to Finland "was easy in a way because it has been a dream. I think it's a dream for every coach that one day there's a chance to manage your own country," he said. "That dream has now come true, which is wonderful."
"But I must say it has been difficult because of the Kilmarnock situation," he added. "We have had a wonderful season there."
"We have been relatively successful there," he said modestly. "The relationship I have with the chairman has been excellent. The backroom staff, the players, all the supporters have been very supportive and hard-working so it was difficult in that respect."
Finland's next match is June 3 against San Marino.
