World champion Ogier had been fastest on all three of the morning loop's stages in his Volkswagen Polo R WRC and led from team-mate Mikkelsen ahead of the afternoon's running despite the pair aquaplaning off on the Svullrya stage.
The Frenchman kept his car on the road on SS7's re-run of Svullrya, but Mikkelsen lost the rear of his and hit a tree stump, dropping him to seventh overall.
It was instead Meeke who took up the mantle of challenging Ogier, the Briton having posted the fastest time on SS7 to reduce his arrears to 21 seconds.
Breen: Sweden exceeded expectations
Meeke was fast again at the start of SS8, but saw his hopes of victory dashed after hitting a rock buried in the road, ending his rally early.
He had also been forced to retire from second on the season-opening Monte Carlo Rally after his Citroen DS3 WRC was damaged by a rock.
With his two closest challengers dropping away, Ogier's advantage at the end of day one stands at 26.9s from the impressive Paddon.
Paddon's snow rally experience heading into the event was limited to two previous Rally Sweden appearances, but on his first outing in Hyundai's New Generation i20 WRC the Kiwi took the afternoon stages by storm, setting the second-fastest time behind Meeke on SS7 before ending the day with the fastest times on SS8 and SS9.
That pace allowed Paddon to escape from what had been a five-car scrap for second, building a seven-second lead over third-place Mads Ostberg.
The Norwegian was another to impress in the afternoon, as was Estonian Ott Tanak, who continued to perform well with his DMACK tyres just a second further back in fourth.
Dani Sordo remains in contention after a consistent run in his i20 allowed him to finish the day in fifth ahead of Mikkelsen.
Henning Solberg holds seventh in his privately-entered Ford Fiesta, having enjoyed a day-long battle with Craig Breen.
Making his bow in factory WRC machinery, Irishman Breen had a steady start to the day but shone on SS7 where he set the third-fastest time.
He lost time with a spin towards the end of SS9, but was helped by rival Solberg's engine cutting out on the same stage, so they remain just two seconds apart.
Jari-Matti Latvala endured a torrid day in the third Volkswagen Polo and eventually stopped on Friday's final stage with a suspected suspension issue, the Finn having incurred a broken driveshaft on the morning's opening stage.
Thierry Neuville picked up a similar problem on SS4 and is over three minutes behind 10th-placed Lorenzo Bertelli.
Elfyn Evans recaptured the WRC2 lead after a combination of impressive pace and troubles for his rivals.
Early leader Fredrik Ahlin relinquished the lead after his throttle stuck on SS7 and now trails the Briton by 17.1s, while Pontus Tidemand ended the day fourth despite suffering driveshaft issues.
Autosport Race Centre Live's Rally Sweden coverage resumes from 7am UK time on Saturday
Rally Sweden gets extended WRC deal
Ogier beats Paddon to Sweden win