Jean Todt, a World Rally Championship co-driver for Talbot driver Guy Fréquelin, was recruited by Peugeot to build a sporting department from scratch. The team established itself at 8 rue Paul Bert in Boulogne-Billancourt near Paris and debuted its Group B Peugeot 205 Turbo 16 in the 1984 WRC season, taking its first victory on Rally Finland in the hands of Ari Vatanen.
The 1985 season proved the team's defining rally campaign. Vatanen and Timo Salonen shared driving duties, winning seven of the twelve rounds to deliver Peugeot its first manufacturers' title, with Salonen also claiming the drivers' championship. After Vatanen suffered serious injuries in Argentina in 1985, Juha Kankkunen replaced him for 1986 and delivered a second consecutive manufacturers' crown. When the FIA banned Group B cars after the fatal accident of Henri Toivonen at the 1986 Tour de Corse, Peugeot redirected its energy to rally raid.
The 205 Turbo 16 was adapted for the Dakar Rally, winning the event in 1987 and 1988. Peugeot then switched to the 405 to win Dakar again in 1989 and 1990, maintaining an extraordinary run of off-road dominance. The organisation also competed at the Pikes Peak International Hill Climb three times between 1987 and 1989, winning the prestigious American mountain race in 1988 and 1989.
The sportscar arm of the programme relocated to Vélizy-Villacoublay and launched the Peugeot 905 project in November 1988, targeting the World Sportscar Championship. The 905 made its racing debut at the final two rounds of the 1990 season. A year later, the team finished second in the 1991 WSC, before making breakthrough history in 1992.
At the 1992 24 Hours of Le Mans, Peugeot Talbot Sport claimed victory with Derek Warwick, Yannick Dalmas, and Mark Blundell sharing the winning car. The same season brought the 1992 World Sportscar Championship title, courtesy of Warwick, Dalmas, Philippe Alliot, and Mauro Baldi. Peugeot repeated at Le Mans in 1993 with an emphatic one-two-three finish, the winning car driven by Éric Hélary, Christophe Bouchut, and Geoff Brabham. With those victories secured, Peugeot Talbot Sport withdrew from sportscar competition. Jean Todt subsequently left for Scuderia Ferrari.
Peugeot transitioned to Formula One as an engine supplier in 1994, using a 3.5-litre V10 engine derived from the 905's powerplant. Their first partner was McLaren, but poor reliability and eight podiums without a single victory led to the partnership ending after one season. McLaren switched to Mercedes-Benz engines for 1995.
Peugeot continued with Jordan Grand Prix from 1995 to 1997, securing five podiums, including a notable double finish at the 1995 Canadian Grand Prix where Eddie Irvine and Rubens Barrichello took second and third. Political considerations then prompted Peugeot to move their factory support to the new Prost Grand Prix team for 1998, 1999, and 2000. The collaboration proved disastrous. Prost scored a single point in 1998, improved to nine in 1999, and went pointless in 2000. After 115 Grand Prix entries and fourteen podiums total without a win, Peugeot withdrew from Formula One at the end of 2000. The engines were subsequently purchased by an Asian consortium called Asiatech and used by Arrows and Minardi in 2001 and 2002.
Peugeot Sport — as the organisation became known — returned to the World Rally Championship in 1999 with the Peugeot 206 WRC under director Corrado Provera. Marcus Grönholm gave the car its first win at Rally Sweden in 2000 and went on to claim the drivers' title, while Peugeot also secured the manufacturers' championship. Further manufacturers' titles followed in 2001 and 2002, with Grönholm winning his second drivers' title in 2002. Richard Burns, the 2001 champion, joined from Subaru for 2002 and 2003 before illness ended his career. Peugeot lost the manufacturers' crown to Citroën in 2003.
A new 307 WRC was introduced for 2004 but struggled for pace. After Grönholm's sole championship victory in Finland, Peugeot finished a disappointing fourth in the constructors standings. Markko Märtin joined for 2005 but withdrew from the WRC following the death of his co-driver Michael Park in Great Britain. PSA Peugeot Citroën pulled both the Peugeot and Citroën WRC teams from the championship at the end of 2005.
Peugeot Talbot Sport and its successor Peugeot Sport rank among the most successful factory motorsport programmes ever assembled, combining WRC titles, Dakar victories, Le Mans wins, and Formula One engine supply across nearly three decades of competition. The department also won the Intercontinental Rally Challenge constructors' title three consecutive times between 2007 and 2009 and later returned to sportscar racing with the 908 HDi FAP, winning the 24 Hours of Le Mans in 2009. The team's transformation from Todt's 1981 creation into a global motorsport force stands as one of French automotive history's defining stories.