The Quick Step-Floors rider clocked a best time of 21 minutes 39 seconds to beat Alberto Contador (TrekSegafredo) by 19 seconds, and Tony Gallopin (Lottos Soudal) by 20 seconds.
Alaphilippe, second in the top classic Liege-Bastogne-Liege in 2015, winner of last year's Tour of California and fourth in the Olympics road race, now leads Gallopin by 33 seconds and Gorka Izaguirre (Movistar) by 47 seconds.
Among the top climbers still in contention, Sergio Henao (Team Sky) is fourth overall, 1:05 off the pace ahead of Dan Martin (Quick Step Floors), who is 1:20 behind the leader.
Alaphilippe is hoping to become the first Frenchman to win Paris-Nice since Laurent Jalabert prevailed in 1997.
"I tackled this Paris-Nice differently from previous years and I had a great motivation,” Alaphilippe said. “The form was good and this time trial was really designed for me, very fast at the start and with a good climb in the end.
“I was very focused and a little bit nervous because I knew I was going to suffer as hard as I could. I didn't even know I'd won when I crossed the line. I was full gas. I keep it at the back of my mind that I can keep the yellow jersey but there is serious competition and the last stages are really difficult.
“My most serious rival is myself. It's a great victory, it's going to be a great motivation for the team to keep the jersey until Sunday. The yellow jersey means so much in the history of cycling. Knowing I was so close, I told myself to just go for it.”
Contador is in eighth place, 1min 31sec off the pace but will bid to overturn the deficit in Saturday's penultimate stage which finishes up the Col de la Couillole, a 15.7km climb at an average gradient of 7.1 per cent.
"I rode a good time trial, but Alaphilippe was really fast, especially on the flat part before the climb up the Mont Brouilly. Congratulations to him."
"It was a very fast time trial, it's now time to recuperate to be ready for the next stages," said Contador.
"Alaphilippe and Gallopin are the two favourites. I’m behind, I’ll see what I can do but the truth is that it will be very complicated. Alaphilippe is extremely talented."
The fifth stage takes the peloton 199.5km from Quincie-en-Beaujolais to Bourg-de-Peage.