Stern studied piano at the Eastman School of Music, achieving her bachelor's in 1968, then attended the New England Conservatory of Music (1968–70). Her initial training was classical, and her interest in improvisation was sparked by her experience with figured bass realizations in early music. Her first major gigs as a jazz musician came in the early 1980s, playing in an octet with Julian Priester and Richie Cole; she also worked in R&B groups and Latin music ensembles during this decade. In the early 1990s she worked often with Lee Konitz and played with Vic Juris among others, in addition to leading her own band, with whom she recorded several albums.
In 2004, Peggy created the Wall Street Jazz Festival ("where the traditions meet the progressives, and all the leaders are women") in Kingston, NY; the Festival has been held twelve consecutive years to date. The Festival has featured Sheila Jordan, Ingrid Jensen, Christine Jensen, Jay Clayton, Dena DeRose, Su Terry, Claire Daly, Jamie Baum, Teri Roiger, Roberta Piket, Virginia Mayhew, Laura Dubin, Sheryl Bailey, Allison Miller, Maryann McSweeney, Marilyn Crispell, Francesca Tanksley, Erica Lindsey, Lee Shaw, Nina Sheldon, Betty MacDonald, Rebecca Coupe Franks, Suzi Stern, Jenny Scheinman, Natalie Cressman, Amy shook, and Peggy Stern's band Estrella Salsa.
Currently residing in Austin, Texas, Stern has recently released Z Octet, an orchestrated version of her most personal compositions.
- City Hawk ( BAM Records, 1985)
- The Christmas Collection (Etoile, 1986)
- Alijah (Estrella, 1988)
- Lunasea (Soul Note, 1992) with Lee Konitz
- Pleiades (Philology Records, 1993)
- The Jobim Collection (Philology, 1996) with Lee Konitz
- The Fuchsia (Koch Records, 1997)
- Room Enough (Koch, 1999)
- Actual Size (Koch, 2000)
- Estrella Trio (Estrella, 2006)
- The Art of the Duo (Estrella, 2010)
- Z Octet (Estrella, 2015)
- Gary W. Kennedy, "Peggy Stern". Grove Jazz online.