The 34-year-old full-back confirmed in December his Test career was over after 109 Scotland caps and 809 points - both records - and he is one of 10 players set to depart at the end of a season which concludes when the beaten Heineken Cup semi-finalists play Treviso at Murrayfield in the RaboDirect PRO12 on Saturday.
An Edinburgh statement announced Paterson "will take up a new non-playing role with Edinburgh Rugby and Scottish Rugby, with further details announced next week".
Scrum-half Mike Blair is also poised to feature for Edinburgh for the final time along with three other long-serving players - fly-half Phil Godman, hooker Andrew Kelly and flanker Alan MacDonald - and front-rowers Kyle Traynor and Jack Gilding and Argentinian lock Esteban Lozada.
Jim Thompson will miss the Murrayfield goodbye as the full-back is set to play for Scotland in the Emirates Airline Glasgow 7s this weekend.
Edinburgh head coach Michael Bradley said: "Saturday will be a memorable match for a number of reasons. We'll bring the curtain down on an incredible season, say farewell to these fine players and, at the final whistle, look to the future and begin preparations to capitalise on this landmark year.
"It'll be an emotional day for fans and players alike, as they show their mutual appreciation for the role they've played for the club over the years.
"We've enjoyed a historic season in the Heineken Cup this year with a number of memorable matches here at Murrayfield.
"However, our form in the RaboDirect PRO12 has been a constant frustration, so this Saturday will be about drawing a line under that element of our season and sending these guys off on a high."