According to Sky, the move is a loan without an option to buy, with a fee of €750,000 changing hands, a figure that could rise as high as €1m depending on performance-related add-ons.
The 19-year-old scored 15 goals in 38 appearances for Hoffenheim's reserve side in the third tier last season, form that helped him break into Germany's Under-20 squad, and has spent this pre-season training with Hoffenheim's senior squad rather than the reserves, a clear sign of how highly he is now rated at the club.
Zeitler, born in Ingolstadt, joined Hoffenheim from his hometown club last year following a transfer saga that briefly appeared to be heading towards VfB Stuttgart, with Kicker initially reporting the Swabian club had won the race for his signature before Hoffenheim ultimately swooped to sign him instead.
Despite his prolific form for the second team, he is yet to make his senior Bundesliga debut, and the move to Paderborn is designed to offer him a clearer path to regular first-team football in Germany's top flight rather than continuing to compete for minutes in Sinsheim.
SC Paderborn's newly promoted status means Zeitler can continue his development without dropping out of the Bundesliga, joining a club whose recruitment philosophy has increasingly focused on young, technically gifted attacking talent capable of contributing immediately.
The versatile forward, who can operate through the middle, off the left, or in behind a central striker, represents exactly the kind of profile Paderborn have targeted in recent transfer windows as they look to establish themselves in the top flight.