The former Coronation Street actress, 37, will play Ella Forster, who ITV have described as "compassionate and caring".
At a veterinary ball, Ella sticks up for Mandy Dingle (Lisa Riley) and loses her job. Mandy will be at the event with her partner, Paddy Kirk (Dominic Brunt).
Ella soon meets local doctor Manpreet Sharma (Rebecca Sarker) which will lead to an "opportunity" in the forthcoming episodes.
Lane, who was born and raised in Hebden Bridge, said: "I'm so excited to be joining the cast of Emmerdale. Everyone has been so welcoming and I can't wait to start a new chapter playing the role of Ella.
"I've already heard there are big plans for her and I can't wait to see her navigate a new life in the village and hopefully make some friends."
She previously played Kylie Platt, who was married to David Platt on Coronation Street, until she was killed off in a fatal stabbing in 2016. Lane has also appeared in several theatre productions in the last few years.
She has had parts in a production of Road at the Oldham Coliseum theatre, Queen Bess during Big Clock Productions' stint at the Edinburgh Fringe Festival and #BeMoreMartyn at Hope Mill Theatre in Manchester.
Emmerdale producer Kate Brooks said: "Ella is a complex and multi-layered character who comes to the village and certainly makes an impact. Ostensibly she's a good, moral character, but is there more to her than meets the eye? We are absolutely thrilled to welcome an actor of Paula's calibre to the show and we can't wait to have her light up our screens."
Emmerdale will begin filming with Lane this month. The soap airs on weekday nights at 7.30pm on ITV and ITVX.