Berg was born in 1964 in New York City, the son of Laurence "Larry", a US Marine, and Sally (Winkler) Berg. Berg's father was Jewish, as was his maternal grandfather.

Peter was a student in the Chappaqua School System. After graduating from The Taft School in 1980, Berg attended Macalester College in Saint Paul, Minnesota, where he majored in theater arts and theater history. He graduated in 1984, and in 1985 moved to Los Angeles to pursue his film career.

Berg put his acting aspirations on hold when he first arrived in Los Angeles, choosing instead to learn about the film Business as a production assistant. He acted in 21 Jump Street and Quiet Victory: The Charlie Wedemeyer Story (both in 1988). He acted in Never on Tuesday, Miracle Mile, Race For Glory, Shocker, Heart of Dixie, Tale of Two Sisters and Going Overboard in 1989. He acted in Genuine Risk and Forradalom után in 1990. He appeared in Late for Dinner and Crooked Hearts in 1991. In the early 1990s, he appeared in A Midnight Clear, A Case for Murder, Fire in the Sky, Aspen Extreme, Across the Moon, Uneviled and F.T.W.

In 1992, Berg gained recognition for playing a World War II soldier in the film A Midnight Clear. In 1998, Berg made his feature directorial debut with Very Bad Things, a black comedy starring Jon Favreau, Christian Slater, Jeremy Piven, Daniel Stern, and Leland Orser. The film, which was shown at the Toronto and San Sebastian Film Festivals, received mixed critical reception. In 2000, he created Wonderland, an edgy dramatic television series set in an asylum. While the ABC show received rave reviews and garnered a cult following, it failed to deliver ratings and was quickly canceled.

In 1993, Berg was married to Elizabeth Rogers, an agent for Calvin Klein; they divorced in 1998. He had two children with her.

In 2003, Berg directed the action comedy The Rundown. Starring Dwayne "The Rock" Johnson and Seann william Scott, the film received mixed reviews from critics and disappointed at the box office, only grossing 80 million of its reported 85 million budget. In 2004, Berg began work on his third directorial effort, Friday Night Lights, a football film based on the New York Times bestseller written by Buzz Bissinger.

In 2006, Berg developed and became executive Producer of NBC’s Peabody and Emmy Award-winning drama Friday Night Lights, based on the novel and film of the same name.

He appeared in the war film Lions for Lambs (2007) as Lt. Colonel Falco. Berg followed up in 2007 with The Kingdom, a Michael Mann-produced action-political thriller set in Saudi Arabia, starring Academy Award winners Jamie Foxx and Chris Cooper, also with Jennifer Garner whom Berg met when he appeared in a two-part episode of Alias where he played Garner's ex-boyfriend. Berg’s film Hancock, starring Will Smith, Charlize Theron and Jason Bateman, was one of the highest grossing films of 2008.

Berg directed the Hulu.com commercial featuring Alec Baldwin, which both The New York Times and Time magazine named best spot of Super Bowl XLIII. In 2009, Berg directed a two-hour pilot movie for a Fox television series Virtuality. Even though the show was not picked up for a full season, the pilot was released on DVD exclusively through Best Buy. Berg also directed the ESPN documentary "Kings Ransom" in 2009. Berg also wrote the film The Losers (2010).

Berg also directed the science-fiction/action film Battleship (2012) and the war film Lone Survivor (2013), an adaptation of Marcus Lutrell's book of the same name. Variety Writer Justin Chang said Berg delivered "his most serious-minded work to date with Lone Survivor." Berg is developing a sequel to Hancock and producing a live-action version of the graphic novel Hercules: The Thracian Wars.

In 2013, Berg created the opening animation sequence for ESPN's Monday Night Football. The 80-second graphic featured Darth Vader (from Star Wars), Pac-Man, President Ronald Reagan and some highlights of MNF games from 1970-2012. In 2014, he directed the first two episodes of HBO's The Leftovers.

On July 15, 2015, Berg criticized ESPN's decision to honor Caitlyn Jenner with the Arthur Ashe Courage Award with an Instagram post in which he shared a Facebook photo of Army veteran Gregory D. Gadson (a double amputee who played a role in Berg’s Battleship film) alongside one of Jenner. It said: “One Man traded 2 legs for the freedom of the other to trade 2 balls for 2 boobs. Guess which Man made the cover of Vanity Fair, was praised for his courage by President Obama and is to be honored with the ‘Arthur Ashe Courage Award’ by ESPN?” Along with the shared post, Berg commented, "Yup."

In 2016, Berg directed the film Deepwater Horizon, based on the Deepwater Horizon explosion. Berg replaced Director J. C. Chandor, who had exited the film due to creative differences. That same year, he directed CBS Films' Patriots Day, about the Boston Marathon bombing. Mark Wahlberg starred in both films.

In 2017, Berg was asked to direct an ambitious commercial for Hyundai, recorded after the kickoff of Super Bowl LI and aired right after the game.

After Berg received significant criticism for the post, he later clarified his remarks, saying he had the utmost respect for Jenner and transgender individuals; however, he released another photo with statistics on veteran suicide, stating, “I also believe that we don’t give enough attention to our courageous returning war veterans, many of whom have sacrificed their bodies and mental health for our country and our principals [sic] – principals that include the freedom to live the life you want to live without persecution or abuse.”