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The son of a wealthy manufacturer, Paterson initially worked as a clerk for four years and studied classes at Glasgow School of Art in the morning. He proceeded to study in Paris in 1877 in the studio of Jacquesson de la Chevreuse and he became friendly once more with W. Y. Macgregor whom he had known when he was at the Western Academy in Glasgow. In 1882 he became associated with Guthrie, Crawhall and other artists who formed the Glasgow Boys grouping. In 1884 after his marriage he settled in Moniaive in Dumfries-shire and became more distanced from the group but was still involved with them particularly in the launch of the "Scottish Art Review". In 1906 he moved to Edinburgh becoming an Associate Member of the RSA in 1896 and an Academician in 1910.