In cooperation with David Sproxton, a friend of his youth, he realized his dream of "making and taking an animated movie". He graduated in English from the University of York in 1976. He and Sproxton founded Aardman as a low-budget backyard studio, producing shorts and trailers for publicity. Later on, in the early eighties Nick Park joined the group.Lord, Park and Sproxton developed and finalized their style of detailed and lovingly designed clay animation characters from stop motion techniques (though directed by Stephen Johnson their claymation is shown in the music video Sledgehammer (1986) by Peter Gabriel). In 1991 Lord directed and produced Adam, a 6 minute clay animation that was nominated for an Academy Award. Park created the "odd-couple" Wallace and Gromit-shorts in cooperation with Lord and Sproxton. All three together worked as producers, editors and directors. Other awarded productions by Peter Lord are Chicken Run (2000), the first feature film from Aardman and the Academy Award-nominated Wallace & Gromit in The Curse of the Were-Rabbit from (2005).

In May 2006, Lord (along with Sproxton) visited the "Aardman Exhibit" at the Ghibli Museum in Mitaka, Tokyo, Japan, where he met Hayao Miyazaki. Miyazaki has long been a fan of the Aardman Animation works.

Lord was created a Commander of the British Empire (CBE) on 17 June 2006.