The division was created after Jean Todt — a World Rally Championship co-driver best known for partnering Talbot driver Guy Fréquelin — was approached by Peugeot to form a sporting department for the PSA Peugeot Citroën group. The "Talbot" portion of the name reflected the PSA group structure at the time. The team established its rally operations at 8, rue Paul Bert in Boulogne-Billancourt, while the later sportscar racing programme relocated to Vélizy-Villacoublay in July 1990.
Peugeot Talbot Sport debuted its Group B Peugeot 205 Turbo 16 in the 1984 World Rally Championship season, claiming its first victory at Rally Finland in the hands of Ari Vatanen. The 1985 season proved historically dominant: Vatanen and Timo Salonen between them won seven of twelve rounds, delivering Peugeot its first manufacturers' title and Salonen the drivers' championship. Vatanen suffered serious injuries in an accident in Argentina that year and was replaced for 1986 by Juha Kankkunen, who promptly secured a second consecutive manufacturers' title.
Following the FIA's ban on Group B machinery after the fatal accident of Henri Toivonen in 1986, Peugeot Talbot Sport pivoted to rally raid competition. The 205 Turbo 16 was adapted for desert use and won the Dakar Rally in 1987 and 1988; the 405 T16 Grand Raid then extended the run with further victories in 1989 and 1990. The division also competed three times at the Pikes Peak International Hill Climb in 1987, 1988, and 1989, winning the final two editions.
In November 1988, Peugeot Talbot Sport launched the Peugeot 905 project, targeting the World Sportscar Championship's sports prototype category. The 905 made its racing debut in the final two rounds of the 1990 season and finished second overall in the 1991 championship. The 1992 season brought the team's defining endurance achievement: an outright victory at the 24 Hours of Le Mans with Derek Warwick, Yannick Dalmas, and Mark Blundell sharing the winning car. Peugeot also took the 1992 World Sportscar Championship through Warwick, Dalmas, Philippe Alliot, and Mauro Baldi.
The championship did not run in 1993, but Peugeot Talbot Sport achieved a commanding 1–2–3 finish at the 1993 24 Hours of Le Mans. The winning car was driven by Éric Hélary, Christophe Bouchut, and Geoff Brabham. Following that result the team withdrew from sportscar racing, and Jean Todt departed to join Scuderia Ferrari.
Peugeot moved into Formula One for the 1994 season, supplying a 3.5-litre V10 engine — developed from the architecture used in the 905 — to McLaren. Poor reliability dogged the partnership, which produced eight podiums, zero victories, and seventeen retirements before ending after just one season. McLaren subsequently switched to Mercedes-Benz power.
Peugeot then supplied Jordan Grand Prix from 1995 to 1997, achieving five podiums including a second and third place at the 1995 Canadian Grand Prix for Eddie Irvine and Rubens Barrichello. For 1998 through 2000, political and commercial factors drove Peugeot to partner the French Prost Grand Prix. The arrangement proved unsuccessful: just one point was scored across the entire 1998 season, and despite modest improvement in 1999 — including a second place for Jarno Trulli at the European Grand Prix — the 2000 season yielded nothing. Peugeot withdrew from Formula One at the end of 2000 after 115 Grand Prix starts and only 14 podiums in total. The engine assets were subsequently purchased by the Asiatech consortium, which used them in 2001 with Arrows and in 2002 with Minardi.
Peugeot Sport returned to the World Rally Championship in 1999 with the Peugeot 206 WRC, guided by director Corrado Provera. The car's early outings involved François Delecour, Gilles Panizzi, and Marcus Grönholm. Grönholm delivered the car's first win at Rally Sweden in 2000 and went on to take three further victories that year on his way to the drivers' championship; Panizzi added wins in Corsica and Sanremo as Peugeot also secured the manufacturers' title.
The 2001 season brought Didier Auriol into the team alongside Grönholm; Harri Rovanperä and Panizzi contested selected rounds as well. Peugeot retained the manufacturers' crown. For 2002, Richard Burns — the reigning drivers' champion — joined the squad from Subaru, and Grönholm took his second drivers' title while Peugeot claimed a third consecutive manufacturers' championship. The 2003 season saw Marlboro join as title sponsor; Grönholm won three rounds but Peugeot lost the manufacturers' title to Citroën.
A new car, the 307 WRC, arrived for 2004. Grönholm's sole win of the season came again at Rally Finland. In 2005, signing Markko Märtin from Ford to partner Grönholm, the team suffered a tragic setback when Märtin's co-driver Michael Park was killed after their 307 WRC left the road at Rally Great Britain. Grönholm took two wins during the season. PSA Peugeot Citroën withdrew both Peugeot and Citroën from the WRC at the end of 2005; Peugeot did not return to the series, though it continued competing in the Intercontinental Rally Challenge using the 207 S2000.
Peugeot Talbot Sport, operating under the broader Peugeot Sport umbrella, remains one of the most decorated factory motorsport organisations in history. Its Group B programme redefined what a factory rally team could achieve, and its twin Le Mans victories in 1992 and 1993 established a benchmark for French sportscar engineering. Jean Todt's tenure at the helm, before he moved to Ferrari and later to the FIA presidency, shaped the culture and ambition of the entire operation. The name Peugeot Talbot Sport gradually gave way to the simpler "Peugeot Sport" designation in later years, but the legacy of the Talbot Sport era remained central to the brand's motorsport identity.