On my client's Magento site, PayPal Payments Standard has worked fine with 1.8 CE, which we upgraded to about five months ago. About 10 days ago, Magento stopped sending order confirmation emails, but only on PayPal-paid orders. (PayPal itself still sends a "receipt for your payment" confirmation email.) At the same time, Magento also stopped creating invoices, again, only for PayPal-paid orders. The order is created successfully, but not the invoice. I've checked PayPal configuration, and it appears to be configured correctly. There are no recent entries in the exception log. Other emails, such as password-reset, are sending, and the client's ISP reports no issues with email. I'm sure there must be a setting that's been modified, but I can't find any settings that don't look right. Any ideas for further troubleshooting this problem?
Check PayPal IPN - go to your PayPal profile > under Selling Tools > Click on Instant Payment Notification (Update) and check if IPN is turned off. If PayPal is not able to send payment notification back to Magento then the Order status doesnt change, which is what usually triggers the emails.
The IPN handler on Magento is usually: www.domain.com/paypal/ipn/