Knowledgebase
How to configure Magento to work with PayPal
PayPal is a convenient payment solution for your store; it's integrated into Magento and that makes it easy to set up and configure.
You need a merchant/business account in PayPal. You can either go to the official PayPal site directly, or you can use the link provided in your site's admin panel (System>Configuration>PayPal, there's a link under the email field). On the home page of PayPal's site click on Sign up, select the business account, choose a payment method and fill all the personal information.
You can configure the different PayPal options for your store from your site's admin panel. Log in to the admin panel and go to System>Configuration>PayPal. There, in the Merchant Account panel, select the country and type the email you used for the registration of your PayPal account. Then mark the checkbox for the appropriate payment method and a new panel will appear with the options for that particular method.
You also have to provide the API credentials in the API/Integration Settings panel. If you forgot to get those from your PayPal account, click on the button Get Credentials from PayPal. A new window will open prompting you to log in to your PayPal account. Log in and get the credentials from there. Then just copy them in your admin panel.
If you want to create a test account click on the Sandbox Credentials button in the API/Integration Settings panel. For more information on this read the article and tutorial on creating a PayPal test account.
There are also some useful options in your PayPal account (Profile button).
You can also checkout the tutorial on configuring PayPal for your Magento store.