Sterling was born in Toowoomba and raised in Raymond Terrace & Wagga Wagga, New South Wales. He commenced his playing career at the age of fourteen when he joined the Wagga Wagga Kangaroo Panthers in 1974. As a teenager he spent several years living at RAAF Base Wagga, where his father was serving as a dental technician. Sterling then moved to Sydney where he attended the Patrician Brothers' College on a scholarship.
Sterling compensated for a lack of size and pace with control and organisational skills that allowed Parramatta's all-star back line of Brett Kenny, Mick Cronin, Steve Ella and Eric Grothe a great deal of ball. His kicking, backed up by Kenny and Ray Price's superb chasing, often gave Parramatta an advantage in territory. His fast mind meant that he rarely made a wrong decision.. He was an effective defender rare to miss a tackle, and often in position to secure a loose ball.
He joined the Parramatta Eels in 1978 making his first appearance as a stand-in Fullback during the 1978 finals series, and played his first game as the Eels halfback in the 17-11 Minor-Semi replay loss to eventual premiers Manly-Warringah. After a few games at Five-eighth in 1979, Sterling shifted to halfback and established himself as a player to watch in 1980. 1981 saw the Jack Gibson coached Eels win their first Grand Final with a 20-11 win over the Tommy Raudonikis led Newtown Jets, with Sterling's superb skill and control one of the decisive factors. He made his State of Origin debut for New South Wales in the 1981 State of Origin game, setting up a try for Mick Cronin, though the Wally Lewis led Queenslanders turned a 10-point half time deficit into a 7-point, 22-15 win. Sterling himself admitted he was a surprise choice for NSW as he had only made his representative debut a few weeks earlier when he played for City Seconds and rated himself as fifth in line for the NSW job. He was selected over his long-time rival for the NSW halfback spot, Canterbury-Bankstown's Steve Mortimer who had debuted for Australia in their two test series win over France only weeks before the Origin game.
In 1982, Parramatta could seemingly do no wrong, winning the Minor Premiership by four games over Manly. Though they were beaten 20-0 by Manly in the Major Semi-final, the Eels then thrashed Eastern Suburbs 33-0 in the Preliminary Final, before going on to turn the tables on the Sea Eagles with a 21-8 in the Grand Final at the Sydney Cricket Ground to win their second successive premiership.
Sterling was then chosen for the 1982 Kangaroo tour, and along with Queensland halfback Mark Murray was backup to incumbent test halfback Steve Mortimer, despite having not played in the 1982 State of Origin series. After travelling with part of the team to Perth to face a Western Australian team and thus missing a place in Australia's first ever test against Papua New Guinea, Sterlo was presented a golden opportunity by coach Frank Stanton when he was chosen for the first game of the tour against English club side Hull Kingston Rovers. Sterling went about cementing his place in the Kangaroos "A" side and went on to make his Test debut for Australia in the first Ashes Test against Great Britain at Boothferry Park in Hull. The 1982 Kangaroos went on to become the first team to go through Great Britain and France undefeated, earning them the nickname "The Invincibles", and was a personal success for Sterling who played in all five tests against Great Britain and France, and cemented his place as the worlds best halfback.
In 1983, Sterling played in Australia's win in the first test against New Zealand at Carlaw Park in Auckland, but wasn't selected for Australia's shock 12–19 second Test loss at Lang Park when Murray was preferred. He was named man-of-the-match in Game 2 of the State of Origin series at the SCG, a game which saw the NSW side with an all-Parramatta backline of Marty Gurr (fullback), Neil Hunt and Eric Grothe (wings), Mick Cronin and Steve Ella (centres) and Sterlo and Brett Kenny (halves), while the Blues, who defeated Qld 10-6, were captained by Eels Lock forward Ray Price. Sterling then helped Parramatta to a third successive Grand Final win with an 18-6 win, again over runaway minor premiers Manly. Following the his third successive premiership and his fifth overall, Jack Gibson, a man Peter Sterling has nothing but high praise for as both a person and a coach, shocked the establishment and resigned as Parrmatta coach.
Sterling did not play for Parramatta, in the first half of 1985 as he returned to England to again link with Hull. Peter Sterling played Scrum-half/Halfback in Hull's 0-12 defeat by Hull Kingston Rovers in the 1984–85John Player Special Trophy final during the 1984–85 season at Boothferry Park, Kingston upon Hull on Saturday 26 January 1985. Though he was relatively quiet upon his return to Parramatta, at the end of the season Sterling's skill allowed Parramatta to defeat Balmain (twice, the second a 32-4 win in the Minor-Semi) and Penrith (Minor Preliminary-Semi), to move from doubtful finalists to the Preliminary Final – where a ruthless Canterbury side on their way to a second successive premiership, easily accounted for the Eels 26-0. As a result of his decision to play in England and miss the first part of the NSWRL premiership, Sterling lost his place in the NSW side in the 1985 State of Origin series to Steve Mortimer, who led the Blues to their first ever series win over Queensland. He also miss his chance to regain his test place for the mid-season tour of New Zealand in 1985, with the halfback role shared between Mark Murray and Manly's versatile utility Des Hasler. By missing both Origin and Test selection in 1985, Sterling missed the opportunity to link with the coach who gave him his first grade debut at Parramatta Terry Fearnley, who coached both representative teams.
While playing for Hull in the early part of 1985, Sterling led the team, which also included a number of internationals such as fullback Gary Kemble, wingers Dane O'Hara and James Leuluai and his halves partner Fred Ah Kuoi (all NZ), centre Garry Schofield (GB), Parramatta second-rower John Muggleton (Aus), and goal kicking forward (and Hull captain) Lee Crooks (GB), into the 1985 Challenge Cup Final against Wigan at the famous Wembley Stadium. In front of a Wembley Cup Final record crowd of 99,801 Wigan ran out 28-24 winners, with Sterling's Parramatta halves partner Brett Kenny (playing for Wigan) winning the Lance Todd Trophy as man of the match. Sterlo, who produced a great game in both attack and defense, had gone into the game as one of the shortest priced favourites to win the Lance Todd Trophy, with bookmakers in Hull allegedly (according to BBC commentator Ray French during the telecast of the Cup Final) refusing to field any more bets on Sterling in the week leading up to the game.
1986 saw Sterling almost carry a clean sweep of the major awards – except the Rothmans Medal – and win the inaugural Clive Churchill Medal in Parramatta's fourth Grand Final victory, reversing the 1984 result with a 4-2 win over Canterbury-Bankstown to send the retiring Mick Cronin and team captain Ray Price out as premiership winners. 1986 also saw the Parramatta with their own home ground for the first time since over-excited fans had burned down the old Cumberland Oval grandstand during the 1981 Grand Final celebrations. Between 1982 and 1985 the club was forced to play home games at Canterbury-Bankstown's home ground, the Belmore Sports Ground, but in 1986 the new Parramatta Stadium was opened by Queen Elizabeth II and Sterling set about making the venue his own personal playground.
During the year he was also part of the NSW Team which swept Qld 3-0 in the State of Origin series (the first time in series history a team had won all three games), winning man of the match in Game 2 at the SCG. After regaining his test place in the successful two test series against New Zealand, Sterling was an automatic selection for his second Kangaroo tour at the end of the season, this time going away as the undisputed number one halfback with 1985 test halfback Des Hasler
Sterling's sharp intelligence marked him as an astute analyst of the game with the former Eel commentating for the Nine Network after initially starting in the media with Western Sydney radio station 2WS and Channel 10 where he was a sideline commentator for their coverage of the 1987 NSWRL finals.
His autobiography, 'Sterlo! The Story of a Champion' was released in 1989.
He later went on to host The Sunday Footy Show, anchoring the program from the show's inception in 1993 until the end of the 2015 season with Sterling replaced by Yvonne Sampson from the 2016 season.
Sterling was also co-host of Nine's The NRL Footy Show from 1994-2006 alongside Paul Vautin. He made a guest appearance in 2007 on the first episode for the year to say farewell to the show before coming back for a short stint in 2010 as alternating host.
He currently hosts Nine's 'Thursday Night Football' and is a member of their commentary team, he also rotates the hosting of 'Sunday Afternoon Football' with Yvonne Sampson.
Sterling joined Triple M in March 2010 as an expert commentator on Monday Night Football and is an occasional panellist on Dead Set Legends and The Rush Hour.
In March 2013, Sterling began hosting a weekly NRL show on Fox Sports called 'Sterlo; airing on Thursday nights. His show was axed in 2014 due to poor ratings competing with The Footy Show and he now hosts 'Sterlo: On The Couch' which airs Tuesday nights.
Since retiring from playing the game, Sterling has won several awards. In 1995, Sterling was picked at halfback in a poll to judge the best Australian team since the introduction of the limited-tackle rule in 1967. He won eight of fourteen votes, with the remainder going to Billy Smith, Ricky Stuart and Allan Langer.