The 24-year-old rider, for a long time one of the best prospects in the peloton, surged away in the three-km final climb in Mende to cross the line two seconds ahead of Davide Rebellin.
The experienced Italian could not match the punishing pace imposed by his young rival in the last stretch but earned a fine consolation with the yellow jersey as the overall leader, three days before the finish in Nice.
Contador follows, six seconds behind, with Slovenian Tadej Vlajavec 23 seconds off the pace.
Cummings and Roche ready to roar
Spaniard David Lopez Garcia was third at the top of the Montee Laurent Jalabert, named after the French rider who won a classic Tour de France finish on it in 1995.
Without a team after his Liberty Seguros outfit folded amidst a doping scandal last year, Contador was hired by Discovery Channel this season and had every reason to celebrate the move.
"I'm really glad with the win. I felt super today in the last climb but I must pay homage to the whole of the Discovery Channel team, who worked hard all day. They did an amazing job," he said.
"Now we'll see what happens. It's far from finished, especially as we have two leaders in the team, myself and Levi Leipheimer," Contador added.
But his American team mate, recent winner of the Tour of California, is currently 13th, 50 seconds behind the 35-year-old Rebellin, who has the know-how to maintain his lead in the last three days of the race.
Leader at the start, Italy's Franco Pellizotti is fourth overall, 31 seconds adrift.
Briton David Millar, the prologue victor and first leader of this Paris-Nice race, had an impressive climb for a non-specialist, finishing 14th, and is now a promising seventh overall, 42 seconds behind Rebellin.
As in previous days, a long break brought interest to the first hours of the stage. Frenchmen Sandy Casar and Amael Moinard and Kazakh Dmitry Muravyev joined forces after 22 km.
They held a maximum lead of 11 minutes and stayed in front until the final climb when Casar was finally caught by Contador with one kilometre to go.
Friday's 178-km fifth stage takes the riders from Sorgues to Manosque on the foothills of the Alps.
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