Elizabeth Jean Peters was born on October 15, 1926 in East Canton, Ohio, the daughter of Elizabeth and Gerald Peters, a laundry manager. Raised on a small farm in East Canton, Peters attended East Canton High School. She was raised as a Methodist. She went to college at the University of Michigan and later the Ohio State University, where she studied to become a Teacher and majored in literature. While studying for a teaching degree at Ohio State, she entered the Miss Ohio State Pageant in the fall of 1945. From the twelve finalists, Peters won. Sponsored by the Photographer Paul Robinson of the "House of Portraits", she was awarded the grand prize of a screen test with 20th Century-Fox.

As her agent, Robinson accompanied her to Hollywood, and helped her secure a seven-year contract with Fox. She dropped out of college to become an Actress, a decision she later regretted. In the late 1940s, Peters returned to college, in between filming, to complete her work and obtain a degree.

The soldier and actor Audie Murphy claimed that he had a relationship with Peters in 1946, before she met Howard Hughes. In 1954, Peters married Texas oilman Stuart Cramer. At the time they married, they had known each other for only a few weeks, and they separated a few months later. There was much talk of Peters possibly retiring from the screen, but the Actress insisted that after her eight-week leave from Fox, she was to return to Hollywood.

Peters was selected to replace Linda Darnell as the female lead in Captain from Castile (1947) opposite Tyrone Power, when Darnell was reassigned to save the production of Forever Amber. Although she had not yet made her screen debut, Peters was highly publicized. She received star treatment during the filming. Captain from Castile was a hit. Leonard Maltin wrote that afterwards, Peters spent the new decade playing "sexy spitfires, often in period dramas and Westerns." She was offered a similar role in the western Yellow Sky (1948), but she refused the part, explaining it was "too sexy". As a result, the studio, frustrated by her stubbornness, put her on her first suspension.

For her second film, Deep Waters (1948), which Peters filmed in late 1947, she was reunited with her Director from Captain from Castile, Henry King. On this, she commented: "It's really a break for me, because he knows where he's going and what he wants, and I naturally have great confidence in him." The film was not nearly as successful as Captain from Castile, but Peters was again noticed. She was named among the best five 'finds' of the year, among Barbara Bel Geddes, Valli, Richard Widmark and Wanda Hendrix. She was next assigned to co-star next to Clifton Webb in Mr. Belvedere Goes to College (1949), but Shirley Temple later replaced her.

In early 1949 Peters signed on to play Ray Milland's love interest in It Happens Every Spring (1949). For the role, she offered to bleach her hair, but the studio overruled this. Although the film became a success, most of the publicity was for Milland's performance.

By 1950, Peters was almost forgotten by the public, although she had been playing lead roles since 1947. In late 1950, she was cast in a secondary role as a college girl in Take Care of My Little Girl (1951), a Jeanne Crain vehicle. A Long Beach newspaper reported that Peters gained her role by impressing Jean Negulesco with her sewing. She once became famous for playing a simple country girl, but as she grew up, the studio did not find her any more suitable roles.

Due to her insistence, Peters was given the title role in Anne of the Indies (1951), which the press declared was the film that finally brought her stardom. Before its release, she was cast in Viva Zapata! (1952) opposite Marlon Brando. Julie Harris had been considered for this role. Also in 1951, Peters had her first collaboration with Marilyn Monroe, when they had secondary roles in As Young as You Feel.

Peters was set to play the title role in the drama film Wait Till the Sun Shines, Nellie (1952). It was the first time since the beginning of her career that Peters received this much publicity. While shooting the film in Hutchinson, Kansas, Peters was honored with the title 'Miss Wheatheart of America'.

In 1953 she also starred in the film noir Vicki. The Writer Leo Townsend bought the story of the film, a remake of I Wake Up Screaming, as a vehicle for Peters. Townsend said that he gave the role to Peters in December 1952, because she was "one of the greatest sirens he's ever seen."

Other 1954 films co-starring Peters were the westerns Apache and Broken Lance. Although Broken Lance did not attract much attention, she was critically acclaimed for her performance in Apache. One critic praised her for "giving an excellent account for herself", declaring she was "on her way to becoming one of the finest young actresses around Hollywood today."

Peters' next (and ultimately final) film was A Man Called Peter (1955), in which she played Catherine Marshall, the wife of Peter Marshall, a Presbyterian minister and Chaplain of the United States Senate. After the release of A Man Called Peter, Peters refused several roles, for which she was placed on suspension by the studio.

During her marriage, which lasted from 1957 to 1971, Peters retired from acting and social events in Hollywood. According to a 1969 article, she went through life unrecognized, despite being protected by Hughes' security officers all day. Living in anonymity was easy, according to Peters, because she "didn't act like an Actress." It was later reported that during the marriage, Peters was frequently involved in numerous activities, such as charitable work, arts and crafts, and university studies including psychology and anthropology at UCLA.

In March 1959, it was announced that Peters was to return to the screen for a supporting role in The Best of Everything. But, she did not appear in that film; and, despite her earlier announcement, never produced a film.

In 1970, rumors arose of Peters making a comeback to acting when the press reported that she was considering three film offers and a weekly TV series for the 1970–1971 season. She chose the television movie Winesburg, Ohio (1973). Afterwards, she said, "I am not pleased with the show or my performance in it. I found it rather dull." At the beginning, she had expressed enthusiasm for the project, saying: "I'm very fond of this script. It's the right age for me. I won't have to pretend I'm a glamour girl." Her co-star william Windom praised her, saying she was "warm, friendly and charming on the set."

Later in 1971, Peters married Stan Hough, an executive with 20th Century Fox. They were married until Hough's death in 1990.

In 1976, Peters had a supporting role in the TV miniseries The Moneychangers. When asked why she took the role, she said: "I'll be darned if I know. A moment of madness, I think. I ran into my old friend Ross Hunter, who was producing The Moneychangers for NBC-TV, and he asked me if I wanted to be in it. It seemed like fun. It's a nice part – not too big – and I greatly admire Christopher Plummer, whom I play opposite."

Peters appeared in the 1981 television film Peter and Paul, produced by her then husband, Stan Hough. She guest-starred in Murder, She Wrote in 1988, which was her final acting performance.

Peters died of leukemia on October 13, 2000 in Carlsbad, California, two days before her 74th birthday. She was buried at the Holy Cross Cemetery in Culver City, California.