Paterson, who left Turf Moor two summers ago for Huddersfield, has been without a club since having his contract terminated by Orlando City, a club managed by Adrian Heath. He'd joined them initially on loan from Huddersfield but made the move to Florida permanent when he was released by the West Yorkshire Club.
However, a series of injuries restricted him to just over 50 minutes in four substitute appearance and that's what led to the parting of the ways.
He's been training with Blackpool for some time and will now be with them until the end of the season.
Paterson said of the move: "As soon as I came in to train the manager wanted me to sign and wanted me to prove my fitness. I feel fit and ready to go out and play some games.
"I'm joining the club to add experience and hopefully fire power. I'm looking forward to playing as many games as I possibly can this season for Blackpool."
Signed for Burnley by Owen Coyle in June 2008 from Scunthorpe, he scored twelve league goals in our promotion season and then added that play-off goal at Reading. But he struggled with injuries and left after five years with the club in which he'd started exactly 100 league games, adding another thirty as a substitute and scoring 29 goals.
His last goal in English football was in November last year when he played for Fleetwood in a 1-0 defeat at Swindon during a loan from Huddersfield.