Peng Liyuan is a native of Yuncheng County, Shandong province. Peng joined the People's Liberation Army in 1980, when she was 18 years old, and began as an ordinary soldier. Because of her vocal talent, Peng later performed during frontline tours to boost troop morale during the Sino-Vietnamese border conflicts. Peng first performed nationally and came to fame during the earliest rendition of the CCTV New Year's Gala in 1982, when she performed On the Plains of Hope.

Xi and Peng were introduced by friends as many Chinese couples were in the 1980s. Xi was reputedly academic during their courtship, inquiring about singing techniques. Xi was the son of famous Chinese revolutionary Xi Zhongxun, and Peng's family obviously accepted the relationship with ease, due to his attitude. After parental consent, the couple married on 1 September 1987 in Xiamen, Fujian. Four days later, Peng Liyuan returned to Beijing to appear in the National Art Festival, and then immediately departed for the United States and Canada to perform. Since that time, Xi and Peng have led largely separate lives, with Peng spending most of her time in Beijing, and her husband spending his time in Fujian and later in Zhejiang.

Directly after the Tiananmen Square protests of 1989 in June 1989, Peng Liyuan sang for the martial-law troops. A photo showing the scene in which Peng, wearing a green military uniform, sings to helmeted and rifle-bearing troops seated in rows on Beijing's Tiananmen Square, was swiftly scrubbed from China's Internet before it could generate discussion online. However, the image — seen and shared by outside observers — revived a memory of the leadership's preference to suppress. The image was from the back cover of a 1989 issue of the People's Liberation Army Pictorial, a publicly available military magazine.

Peng has been married to Xi Jinping for over 25 years. Together they have a daughter named Xi Mingze (习明泽) born in 1992, nicknamed Xiao Muzi (小木子).

Peng is actively involved in politics, and is a member of the 11th National Committee of the Chinese People's Political Consultative Conference. Peng is a WHO Goodwill Ambassador for tuberculosis and HIV/AIDS since 2011.

For the greater part of their relationship, Peng has enjoyed a very positive reputation within China, comparable to that of her Politician husband. Since her husband became General Secretary of the Communist Party (de facto paramount leader) in November 2012, and Chinese President (de jure head of state) in March 2013, the American press refers to her as the First Lady of China.

In June 2013, the American Foreign Policy magazine's article Why Michelle Obama Shouldn't Meet With Peng Liyuan, approved the First Lady of the United States Michelle Obama's choice not to meet with Peng Liyuan who allegedly sang in support of Chinese troops in Tiananmen Square in 1989, following a crackdown on protesters on 4 June. Nevertheless, Michele Obama met Peng in a number of highly publicised tours in both Beijing and Washington D.C.

On 20 November 2014, Massey University in New Zealand conferred Peng an Honorary Doctorate in recognition of her international contributions to performing arts, health, and education. Peng sang in a song-and-dance number in 2007 shown on Chinese television, that featured Tibetans thanking the Chinese military for liberating them.