"I am delighted to be joining the wonderful cast... for what is going to be an exciting time ahead," said the actor, who appeared with ex-EastEnder Michelle Collins in BBC drama Sunburn.
"I can't wait to get started and seeing what's in store for my character."
Nicholas's EastEnders debut follows Taylforth's surprise return to Albert Square during EastEnders' 30th anniversary celebrations in February.
The actress's character, last seen in the soap in 2000, had been thought to be dead for more than a decade after a car crash in South Africa.
"We are all thrilled that Paul has agreed to join our cast to play Gavin," said Dominic Treadwell-Collins, the show's executive producer.
"It's brilliant to have him back on our screens, playing a major part in Kathy's explosive return to the Square, while also holding the key to many more of the Square's secrets."
Nicholas made his name on the West End stage in such shows as Jesus Christ Superstar, Hair and Cats before landing the role of Vince Palmer in Just Good Friends.
Created by John Sullivan, the sitcom - which ran from 1983 to 1986 - saw his character enjoy an on-off relationship with old flame Penny, played by Jan Francis.
Nicholas has since enjoyed success as a theatre producer and a recording artist and makes regular appearances in pantomime.
The actor is currently touring the UK in a stage version of Agatha Christie's And Then There Were None, which plays this week at the Ashcroft Theatre in Croydon.
