Magento – Paypal Standard payment not redirecting to Magento Success page after Payment complete

You need to configure the IPN location of your Magento install within your Paypal configuration panel.

Source: https://www.paypal.com/ipn

What is an IPN?

From Paypal's manual pages:

Instant Payment Notification (IPN) is PayPal's message service that sends a notification when a transaction is affected. Once IPN is integrated, sellers can automate their back office so they don’t have to wait for payments to come in to trigger order fulfillment.

Enabling in Paypal

The below instructions are from the Magento Wiki, and are intended for the Sandbox Developer site - however they would be applicable for your production site as well.

Go back to your Paypal Developer Account and login if necessary. Click on to “Test Accounts”: Choose your “seller account” (this should be a premier account) Click the button to “Enter Sandbox Test Site” This will log you in as that user.

You need to go to Profile and turn on IPN (My Account>Profile)

Starting with Magento 1.4.0.0, the ipn url is now : http://www.yoursite.com/paypal/ipn/standard/, however since 1.4.1.0 it changed again to be just http://www.yoursite.com/paypal/ipn/

But in fact this is not important because magento passes the notify_url thru the API to Paypal and the notify_url parameter overrides the Paypal account IPN url. It is why if you have multiple websites on a single magento instance, it can work with one single Paypal account.

IPNs will send information about payment status and can move orders into different states/statuses depending upon the payment's decline/accept. You can configure a number of options in Paypal, such as the frequency of retries upon failure. If you have a business account with Paypal please give them a call and ask for Merchant Technical Services, they should be able to assist you with getting this set up if you feel the above is too technical.

The action for this form is set in the file Mage_Paypal_Block_Standard_Redirect::_toHtml. Here the form is created and the action is added via the following snippet:

$form->setAction($standard->getConfig()->getPaypalUrl())
    ->setId('paypal_standard_checkout')
    ->setName('paypal_standard_checkout')
    ->setMethod('POST')
    ->setUseContainer(true);

The function for getting the path to paypal will simply perform a sprintf and replace some items based on if you are using the sandbox or if you are passing in parameters.

public function getPaypalUrl(array $params = array())
{
    return sprintf('https://www.%spaypal.com/webscr%s',
        $this->sandboxFlag ? 'sandbox.' : '',
        $params ? '?' . http_build_query($params) : ''
    );
}

It appears that in newer versions of Magento this url has been changed, in Mage 1.9 the functions looks as follows.

public function getPaypalUrl(array $params = array())
{
    return sprintf('https://www.%spaypal.com/cgi-bin/webscr%s',
        $this->sandboxFlag ? 'sandbox.' : '',
        $params ? '?' . http_build_query($params) : ''
    );
}

What I would do firstly is try updating your system to use the url https://www.%spaypal.com/cgi-bin/webscr%s to see if that works.