The singer will join a line-up that includes Ed Sheeran, who previously was forced to turn the charity down, The Cure and Suede.
Paolo played teased new single Scream (Funk My Life Up) this week, which is taken from his forthcoming album Caustic Love.
The concert will take place at London's Royal Albert Hall in March.
The venue will also host a comedy night featuring stand-ups including Jason Manford, John Bishop and Micky Flanagan.
Organiser Roger Daltrey said he sent "a few million emails" to get the right line-up for the annual fund-raising event and said Sheeran's appearance "means a lot" after he had to drop plans to play last year because of touring commitments.
The Who frontman said: "He said he would do it last year but unfortunately because of his schedule he couldn't, but he's turning up for us this year",
The concerts have raised more than £17million for young people with cancer since starting in 2000.
The Suede gig, which will see the band perform their second album Dog Man Star in its entirety, marks a return to the event four years after the newly-reunited rockers played there.
Frontman Brett Anderson said: "It's great being involved with Teenage Cancer Trust again. It's a fantastic charity and we have a proud history of involvement with them. The gig we did for them at the Royal Albert Hall in 2010 was possibly my favourite ever show in 25 years of playing live."
Tickets go on sale this Friday.