Paatelainen, 52, has previous experience of managing at international level with his native Finland and also Latvia.
He said: “I’m honoured to be given the chance to come and be the head coach of the Hong Kong national team.
“I’m looking very much forward to doing my utmost to help the team to improve and help football improve as a whole.
“It’s a wonderful opportunity. I’m very honoured and thankful to be given the chance.
“I’m looking forward to working with the FA. From the first moment that I started talking to people, the CEO and everybody else at the Hong Kong FA, I realised there is a real desire to develop and go forward.
“I want to be involved with an attitude like that.”
Paatelainen managed Hibs between January 2008 and May 2009, having previously been in charge at Cowdenbeath and Finnish club TPS. He later went on to have spells at Kilmarnock and Dundee United.
As a player, he was a fans’ favourite during two spells at Easter Road, scoring 40 goals in 135 games.