An investigation by the Parliamentary Commissioner for Standards Kathryn Stone found he repeatedly lobbied ministers and officials on behalf of two companies for which he was acting as a paid consultant - Randox, and Lynn's Country Foods.
The Conservative North Shropshire MP has strenuously denied any wrongdoing, saying that he wants to prove his case in court.
The Commons Standards Committee said his actions were an "egregious" breach of the rules on paid advocacy by MPs and recommended that he should be suspended for 30 sitting days.
But in an angry statement, former cabinet minister Mr Paterson rejected the commissioner's findings, accusing her of making up her mind before she had even spoken to him.
"This is a biased process and not fair," he said.
"It offends against the basic standard of procedural fairness that no-one should be found guilty until they have had a chance to be heard and to present their evidence including their witnesses."
Mr Paterson is paid £8,333 by Randox for 16 hours work each month and £2,000 for four hours work every other month by Lynn's. This makes an annual total of £99,996 from Randox and £12,000 from Lynn's and is in addition to the £81,932 salary and expenses money he receives as an MP.
In her report, Ms Stone found that between November 2016 and November 2017 Mr Paterson made three approaches to the Food Standards Agency (FSA) relating to Randox - a clinical diagnostics company - and antibiotics in milk in breach of the ban on paid advocacy.
He was also found to have made four approaches to ministers at the Department for International Development relating to the company and blood testing technology between October 2016 and January 2017.
And Mr Paterson was found to have made seven approaches to the FSA between November 2017 and July 2018 relating to Lynn's Country Foods.
The commissioner further found that he failed to declare his interest as a paid consultant to Lynn's Country Foods in four emails to FSA officials and that he used his parliamentary office for business meetings with his clients on 25 occasions between October 2016 and February 2020.
He also sent two letters relating to his business interests, on House of Commons headed notepaper - the only breach of the rules which he accepted.
In its report, the committee recommended that a motion to suspend Mr Paterson should be tabled for MPs to debate and vote on within five sitting days.
"The committee found that Mr Paterson's actions were an egregious case of paid advocacy, that he repeatedly used his privileged position to benefit two companies for whom he was a paid consultant, and that this has brought the House into disrepute," it said.
However, in a defiant statement the MP said the process to which he had been subjected did not comply with natural justice.
He said that he had been pronounced guilty without being spoken to by the commissioner and that 17 witnesses who came forward to support him were ignored.
Mr Paterson said the investigation had left his wife feeling "beleaguered" fearing that his reputation would be destroyed and that he would be forced to resign as MP for North Shropshire.
"We will never know definitively what drove her to suicide, but the manner in which this investigation was conducted undoubtedly played a major role," he said.
Mr Paterson said the inquiry had not created a "fair and just outcome" and called on MPs to waive Parliamentary privilege so he can challenge it in the courts.
If, however, the Commons backs the committee's recommendations, it could lead to recall proceedings, resulting in a by-election if 10 per cent of his constituents sign a petition demanding one.
In his evidence to the commissioner, Mr Paterson said he had been trying to raise concerns about the contamination of milk and ham with banned carcinogenic substances.
He argued that the rules allow an MP to raise a "serious wrong or a substantial injustice" even if their external associates benefit incidentally.
However this was rejected by the committee, which said: "What might have been permissible in a single exceptional case became Mr Paterson's standard practice.
"It stretches credulity to suggest that 14 approaches to ministers and public officials were all attempts to avert a serious wrong rather than to favour Randox and Lynn's, however much Mr Paterson may have persuaded himself he is in the right."
Mr Paterson has worked for Randox since 2015 and for Lynn's since 2016.
The chairman of Mr Paterson's local Conservative constituency party, Peter Shellard, gave the MP his backing, saying he has "serious concerns" about the conduct of the inquiry.
"He is a trustworthy, decent and honest man," he said.
"He has my unwavering support and that of the North Shropshire Conservative Association."
Downing Street declined to say whether Boris Johnson backs the possible suspension of Mr Paterson.
The Prime Minister's official spokesman said: "The standards regime is a matter for the House of Commons.
"The Prime Minister is mindful of the pain faced by the Paterson family.
"The suicide of Mrs Paterson was sad and tragic and the Prime Minister's sympathies remain with his family following this loss."
Asked if it is right that Mr Paterson was recommended for a suspension, the spokesman said: "This is a matter for the committee themselves.
"It wouldn't be right for me to comment beyond that."
Asked if the Prime Minister thinks the Standards Commissioner is fit for purpose, the spokesman said: "The committee is an independent body, we'd expect them to abide by the rules and regulations that individuals themselves would apply to as well but beyond that I don't have anything to add."