The report was published by the Independent Panel on Forestry.
He also announced that the policy of selling off 15% of the estate to cover costs would be rescinded.
It also called for woodland cover to increase from 10% to 15% by 2060.
Mr Paterson gave few details of the new, independent body that would own, maintain and safeguard the public forest estate except that it would be set up in the longer term.
The panel was established in March 2011 after a ministerial U-turn on plans to dispose of a chunk of its woodlands.
"The new body will have greater independence from Government and greater freedom to manage its resources and maximise its income but with the right safeguards in place to operate for the long-term benefit of people, nature and the economy," he said.
The July 2012 report's other recommendations included:
The Independent Panel on Forestry (IPF) was established in March 2011 after a ministerial U-turn on plans to dispose of a chunk of its woodlands.
The Rt Rev James Jones, Bishop of Liverpool and who chaired the Panel, welcomed the government's response saying it was an "unequivocal endorsement" of the IPF's recommendations.
"I welcome the rescinding of the policy for disposal of 15% of the estate. This is a recognition that the public benefits that flow from forests and woodlands have a legitimate claim on the public purse," he said.
Hen Anderson, co-founder of campaign group Save Our Woods also welcomed the government's response, recognising that it was a vindication of the 500,000 who signed an online petition against the proposal to sell the estate.
"Very positive - an exciting result for us. Two years ago they were flogging off the lot, but a half a million people kicked them in the pants, amazing result."
The IPF also recommended that woodland cover should increase from 10% to 15% by 2060. But the government says it will only increase this to 12%.
However the government is increasing the amount of money that will be spent on forests, boosting the Forestry Commission's budget by £3.5m next year to make up for lost income from sales of woodland. They are also allocating £2m to recognise the additional pressures arising from the outbreak of Ash dieback disease.
This increased emphasis on protection was a concern for the Woodland Trust. A spokesperson said they were "broadly happy" with the government's approach but they were concerned that ministers were not putting enough emphasis on improvement and expansions in forestry.
"We need urgent clarification on the government's plans on the future of forest services," said the spokesperson.
Among the other recommendations in last year's IPF report:
Measurably increasing the quantity and quality of access to public and privately owned woodlands;
Ensuring every child "has an element of woodland-based learning";
Protecting current funding for woodland management and creation;
Increasing England's woodland cover from 10% to 15% by 2060;
Creating a charter, stating that the public forest estate should be "held in trust for the nation".
Measurably increasing the quantity and quality of access to public and privately owned woodlands;
Ensuring every child "has an element of woodland-based learning";
Protecting current funding for woodland management and creation;
Increasing England's woodland cover from 10% to 15% by 2060;
Creating a charter, stating that the public forest estate should be "held in trust for the nation".
In October 2010, the government signalled its intention to sell a sizeable chuck of public forests in England, and launched a public consultation on its plans in January 2011.
It triggered widespread public criticism, with more than 500,000 people signing an online petition against the idea.
Ministers halted the public consultation and the Environment Secretary at the time, Caroline Spelman, told MPs: "I'm sorry. We got this one wrong, but we have listened to people's concerns."
Future direction
Shortly afterwards, a panel of independent advisers - headed by the Right Reverend James Jones, Bishop of Liverpool - was set up to advise the government on "the future direction of forestry and woodland policy in England, on the role of the Forestry Commission, and on the role of the Public Forest Estate".
Responding to the panel's recommendations, Ms Spelman agreed that the "public forest estate should continue to benefit from public ownership", adding: "We need a new model that is able to draw in private finance, make best use of of government funding and a means to facilitate wider and more comprehensive community support."
This has led campaigners to fear that the government, while keeping the forests in public ownership, may still sell "harvesting rights" that will allow commercial operators to fell trees.
Ahead of Mr Paterson's announcement on Thursday, a number of organisations told BBC News that they hoped the new environment secretary would re-affirm the no-sale policy.
"Firstly, I hope they confirm that the forest estate will stay in public ownership," said Hen Anderson, co-founder of campaign group Save Our Woods.
"I also hope that they will fully support all of the recommendations of the panel's report."
She added that she wanted to see publicly owned forests kept "free from the whims of politics", which meant a greater degree of independence for the Forestry Commission.
'Huge opportunity'
Woodland Trust chief executive Sue Holden said: "Trees and woods have been on everyone's minds recently - they are threatened by disease and development and the public are extremely concerned.
"The Woodland Trust has lobbied with the help of members and supporters for the IPF's remaining strong and viable recommendations to be adopted as a whole."
Ms Holden added that ministers had a "huge opportunity to recognise the value and importance of trees and woods".
"I hope it will state an ambition for society to benefit more by setting a target for woodland expansion, and that it will commit to the protection and restoration of irreplaceable ancient woodland," she told BBC News.
Liberal Democrat peer and chairman of the Red Squirrel Protection Partnership, Lord Redesdale, had announced that he was willing to lead a "community-based bid" to acquire Kielder Forest, the largest plantation in England.
He told BBC News: "Why shouldn't local communities have the opportunity of managing the forests, with commercial operators acting on their behalf.
"You have to ask what do you actually want forestry for? If the aim is sustainable development - ie local jobs, ecology and local access - then the model the Forestry Commission is running at the moment is unsustainable.
"The model running at the moment is run very cheaply. No money goes in so the quality of the product coming out is very low," he said.
"If you could actually get private investment into commercial forestry, the returns would be better and this would be excellent for local jobs and local people."
There are in excess of 1,000 publicly owned forests in England, covering an estimated 258,000 hectares.
There are in excess of 1,000 publicly owned forests in England, covering an estimated 258,000 hectares.
The Public Forest Estate (PFE) accounts for 18% of English woodlands, and covers about 9% of the nation - one of the lowest percentages in Europe.
The Public Forest Estate (PFE) accounts for 18% of English woodlands, and covers about 9% of the nation - one of the lowest percentages in Europe.
The estate has been valued at about £700m and costs about £15m per year to manage, equivalent to about 30p per year per person in England.
The estate has been valued at about £700m and costs about £15m per year to manage, equivalent to about 30p per year per person in England.
