Peterson was born in Örebro, Sweden, and honed his car control in kart racing from an early age, winning two Swedish karting titles in 1963 and 1964. Moving to Formula Three, he co-designed a Brabham-derived car called the Svebe with his father Bengt, a baker, and mechanic Sven Andersson before attracting the attention of the Italian Tecno company. With Tecno support he won the 1969 FIA European Formula Three Championship. His reputation in junior categories earned him a Formula One debut at the 1970 Monaco Grand Prix with Colin Crabbe's Antique Automobiles Racing Team in a March 701.
In 1971 Peterson moved to the full March works team and made an immediate impression. Five second-place finishes in Formula One, combined with victories in sports car racing, placed him runner-up to Jackie Stewart in the World Championship — a remarkable achievement for a driver in only his first full season. He also won the 1971 European Formula Two Championship with March. He remained with March until 1973, scoring six podiums over his three-year spell with the team.
Peterson joined Team Lotus in 1973 to partner defending champion Emerson Fittipaldi. His first Grand Prix win came at the 1973 French Grand Prix at Paul Ricard in a Lotus 72, and he added three more wins that year — Austria, Italy, and the United States — but mechanical failures limited him to third in the final championship standings. In 1974, faced with the flawed new Lotus 76, the team reverted to the older Lotus 72. Peterson won three more times — Monaco, France, and Italy — before the car's age became terminal.
The 1975 season brought a further decline in Lotus's form. Chapman promised accelerated development of the new Lotus 77 to keep Peterson at the team, but the car delivered little. Peterson left for a return to March Engineering partway through 1976, winning his final race for March at the 1976 Italian Grand Prix.
Peterson raced for Tyrrell in 1977, driving the distinctive six-wheeled Tyrrell P34B. His season was plagued by retirements, with his only podium a third place in a rain-affected race in Belgium.
For 1978 he returned to Lotus — now operating the ground-effect Lotus 78 and 79 — as number two driver to Mario Andretti. The arrangement was explicit: Peterson would support Andretti's championship bid. He followed through, accepting team orders on numerous occasions and enabling four one-two finishes all with Andretti ahead. Peterson's own wins came when Andretti encountered difficulties: he took the 1978 South African Grand Prix on the last lap and won at the Austrian Grand Prix. Throughout the era Peterson held the reputation of being the fastest driver in Formula One in terms of raw pace; Andretti's superiority in qualifying during 1978 was widely attributed as much to his superior car development input as to outright speed.
The 1978 Italian Grand Prix began disastrously for Peterson. He damaged his Lotus 79 in practice and was forced into the team's spare Lotus 78 — the previous year's car — which had been built around Andretti's smaller frame and had received minimal maintenance all season.
A premature green light at the race start compressed the field as cars were still rolling in the back rows. Peterson, starting from the third row, was immediately passed by several cars. In the ensuing accordion effect approaching the first chicane, James Hunt's car collided with Peterson's Lotus, and the impact sent Peterson into the barriers. The car caught fire; Hunt, Clay Regazzoni, and Patrick Depailler pulled Peterson free before he received serious burns, but both his legs were severely broken — approximately 27 fractures were later identified on X-rays.
His injuries were not initially considered life-threatening. During the night, however, Peterson developed fat embolism. By morning he was in full kidney failure, and was declared dead at 9:55 am on 11 September 1978 at the Ospedale Niguarda Ca' Granda in Milan. His teammate Mario Andretti clinched the World Championship at the same race. Peterson was awarded second place in the 1978 standings posthumously.
Pallbearers at Peterson's funeral in Örebro included James Hunt, Jody Scheckter, Emerson Fittipaldi, Niki Lauda, John Watson, Gunnar Nilsson, and Åke Strandberg.
Peterson competed in 123 Grands Prix and won ten. He is consistently ranked among the very best Formula One drivers never to have won the championship. A 2016 academic study ranking drivers by a mathematical modeling approach placed him 21st all-time and sixth among those who never took the title.
The circumstances of his death were prosecuted in an Italian criminal court. Riccardo Patrese and race director Gianni Restilli were both charged but cleared on 28 October 1981. George Harrison paid tribute to Peterson in 1979 with the song "Faster." A statue in Örebro commemorates him, and the official Ronnie Peterson Museum operated in the city from 2008 to 2009. The 2017 documentary Superswede: A film about Ronnie Peterson, featuring contributions from Andretti, Fittipaldi, and Lauda, preserves his story for subsequent generations.