"Our focus today was on securing a good road position for tomorrow, so it's mission accomplished from that point of view.
"I enjoy tomorrow's stages a lot but we know it's a tough, unforgiving rally. It's nice to be leading this evening but we're not getting carried away."
A number of drivers ran into problems. Four-time world champion Sebastien Ogier lost a lot of time sweeping the dusty roads clean being the first car on the road. He ended the day in seventh place 41 seconds behind Paddon.
Andreas Mikkelsen made his Citroen debut but stalled the car a bunch of times in the afternoon although he enjoyed more success than teammates Kris Meeke and Craig Breen. Meeke rolled his C3 while leading and was forced out while Breen retired with an oil leak. DMACK Ford driver Elfyn Evans retired after crashing while Hyundai's Dani Sordo was the other major casualty - he lost 11 minutes with a turbo problem.
Day 2 is the longest day of the rally with 143km of high speed test awaiting drivers including the famous Micky's Jump on the Monte Lerno stage.
Day 1 standings
Hayden Paddon (Hyundai)
Thierry Neuville (Hyundai) +8.2s
Ott Tanak (M-Sport Ford) +9.5s
Jari-Matti Latvala (Toyota) +9.8s
Mads Ostberg (Ford) +14.7s
Juho Hanninen (Toyota) +38.0s
Sebastien Ogier (Ford) +41.0s
Esapekki Lappi (Toyota) +1:05.3s
Andreas Mikkelsen (Citroen) +1:57.9s
Eric Camilli (Ford) +4:08.0