Henri Lansbury netted twice from the spot in the first half and, while Ben Marshall pulled a goal back before the break with a curling shot, Paterson killed off the visitors with a superb solo effort that saw him claim his fifth goal in three games.
Andy Reid rounded off the rout deep into injury-time, as he produced another spectacular trademark strike from the edge of the box.
With Reds owner Fawaz Al Hasawi set to dip into his pocket again before the end of the January window, having already sanctioned close to £7million of new additions this season, Billy Davies' side look capable of mounting a serious promotion challenge in the coming months.
Forest created four clear chances in the opening 10 minutes. David Vaughan hit a bending, powerful drive that Simon Eastwood saved in awkward fashion. Greg Halford sent a header wide, while Simon Cox put the ball the wrong side of the same post following good work from Jamie Paterson.
Lansbury was thwarted by another brilliant save from Eastwood, this time as the goalkeeper plunged low to his right to push the midfielder's crisp, driven effort around the foot of the post.
Lansbury was to be an integral figure as the Reds took the lead, going down under slight contact from Grant Hanley as the duo chased into the box. Referee Darren Deadman was quick to point to the spot, much to Rovers' fury.
If the decision was harsh, Lansbury was in no mood for sympathy, firing a shot low to the goalkeeper's right, finding the net despite a big touch from Eastwood.
When Paterson darted into the box down the left, Adam Henley was lured into a clumsy challenge, to give away a rather clearer penalty. Lansbury again showed a killer touch, this time rifling a powerful shot high into the roof of the net in the 34th minute.
Forest's two-goal advantage lasted only three minutes, before the failure to deal with a long throw from Tommy Spurr saw the ball break for Marshall on the periphery of the box, from where he bent a brilliant finish beyond the reach of goalkeeper Karl Darlow.
Spurr twice came close to an equaliser in the opening minutes of the second half. Darlow saving well when the defender sent an improvised flick towards the top corner, before the Rovers player headed narrowly over from the resulting corner.
Lansbury was denied his hat-trick when Eastwood saved again, after he had let fly from the edge of the box, while Cox flicked a header wide, after being picked out by Paterson.
Paterson produced a fine solo goal, dancing between three defenders before firing a low shot across Eastwood and into the far corner in the 72nd minute.
Reid rounded things off with a superb, rocket of a shot sent fizzing high into the net from 20 yards, in the fifth minute of injury-time.