Patterson captained the side at the end of last season when Nevill was absent for the birth of his child and will now take charge of a team that is looking to the future with a crop of young batters.
Pat Cummins will remain captain of the one-day side although it remains to be seen how much he is able to play for his state around international commitments. Patterson also led in his absence last season including to victory in the final against Western Australia.
"Being appointed the full-time captain of the Blues' four-day team is something I am very honoured and very privileged to have been asked to do," Patterson said.
"I grew up idolising NSW cricket and have a strong love for NSW Cricket and the Blues so to be named captain is something I don't take lightly and am very excited about. I want NSW cricket to be in a better place when my term is done, whenever that may be and I know I am very lucky to captain such a talented group.
"Nev was a fantastic leader who has left us in great shape and I'm certainly looking forward to having him around in the team if I need to call on him."
During Nevill's time in charge New South Wales won the 2019-2020 Sheffield Shield when they were declared champions following the early finish to the season due to the onset of the pandemic. They were then runners-up last season when they fell to Queensland in the final having also been beaten in the final by Victoria in 2018-19.
"With KP being the next long-term captain, now is natural time for him to take over," Nevill said. "I'll support him in any way he needs or wants, and I'm really looking forward to being able to make a contribution where I can with our younger players and help them move onto a successful next stage of their careers."
Coach Phil Jaques had hinted at the change last week but believes Nevill's knowledge will remain vital for the team
"Whatever role Peter plays within our team he's a leader, he's a top guy, he's someone the players look up to," he told ESPNcricinfo. "Whoever is actually captaining they'll be helped out by a lot of leaders."
New South Wales made significant changes to their batting line-up towards the end of last season in the wake of being bowled out for 32 by Tasmania. Youngsters Lachlan Hearne, Matthew Gilkes and Baxter Holt were brought into the team alongside Jason Sangha and Jack Edwards.
Patterson, who played two Tests for Australia in the 2018-19 season, had a lean campaign with 362 runs at 21.29 and 102 of those came in one innings against South Australia.
New South Wales are due to start their season with Marsh Cup matches in Perth in mid-September followed by the opening round of Sheffield Shield against Victoria on September 29 although there remains uncertainty given the ongoing lockdown in Sydney and how that could impact interstate travel.