Peele was born in New York City, New York. His father is black, and his mother, Lucinda Williams, is white. He attended the Computer School in I.S. 44 for Junior High School and went on to attend The Calhoun School for high school, graduating in 1997. He then went on to attend Sarah Lawrence College as a member of the class of 2001. However, he didn't graduate.

Peele began dating Chelsea Peretti in 2013. They became engaged in November 2015, and, in April 2016, Peretti announced that she and Peele had eloped. In February 2017, they announced that they were expecting their first child.

In 2010, Peele co-starred in the FOX comedy pilot The Station, and appeared with a recurring role in the Adult Swim series Childrens Hospital. He had a supporting role in the David Wain-directed comedy Wanderlust, which was released in 2012.

Peele and his former MADtv castmate and friend Keegan-Michael Key starred in their own Comedy Central sketch series Key & Peele, from 2012 to 2015. In 2016, the pair starred in and produced their first film Keanu. Peele and Key have starred in two episodes of Epic Rap Battles of History. The first featured Peele as Martin Luther King Jr and Key as Mahatma Gandhi, while the second featured Peele as Muhammad Ali and Key as Michael Jordan.

Peele also appeared in a parody music video with Jane Lynch for Americans United for Separation of Church and State, playing the role of "state" in the process of breaking up with Lynch's "church". Together with Key, he played an FBI agent in a recurring role in the 2014 FX crime drama Fargo. In an interview with People magazine, Peele stated that he wanted both his and Key's roles to add comic relief to the show. Key and Peele will be working with Judd Apatow on a feature-length film for Universal Pictures.

In February 2017, Peele's first film as director, Get Out, was released to universal critical acclaim. The film opened at number #1 at the box office, with over $100 million in 3 weeks. The film has grossed over $250 million on a budget of $4.5 million. Peele will produce the HBO series Lovecraft Country written by Underground co-creator Misha Green, which will be shown through the lens of supernatural horror.