He was educated at Methodist College, Belfast, and University College, Oxford. He has been writing poetry since his teens, and was the winner of national young poet competitions in 1978 and 1979. His first published poems were collected in the book Trio Poetry 3 (Blackstaff Press, 1982), and he was publishing poems in the national literary press while still an undergraduate. In 1983, he won Oxford's Newdigate Prize for poetry, and from 1983-5 he was coeditor of the literary magazine Oxford Poetry. In 1986, he was selected as one of the six writers (including Jo Shapcott and Adam Thorpe) featured in New Chatto Poets. His first full collection of poems, Biting the Wax, was published in 1989.
Peter McDonald has been a university teacher of English for many years. He was Fellow and Tutor in English at Pembroke College, Cambridge from 1988-92, and was Lecturer (subsequently Reader) in English at the University of Bristol from 1992-99. In 1999, he became the first holder of the Christopher Tower Studentship and Tutorship in Poetry in the English Language at Christ Church, Oxford, also holding a lectureship in the English Faculty of Oxford University.
In 1991, Peter McDonald published Louis MacNeice: The Poet in his Contexts, and his critical and academic work on that poet has continued with his coedited Selected Plays of Louis MacNeice, and a number of articles; he has re-edited, for Faber and Faber, MacNeice's Collected Poems. More generally, he has been a prolific critic of modern and contemporary poetry, writing for both the national press in Britain and Ireland, and for poetry journals, such as Poetry Review, PN Review, Thumbscrew and Metre. His book Mistaken Identities: Poetry and Northern Ireland is a standard work on poets such as Seamus Heaney, Michael Longley and Paul Muldoon. More recently, in Serious Poetry: Form and Authority from Yeats to Hill, he has challenged contemporary views of poetry and personality with new readings of Yeats, W. H. Auden, T. S. Eliot and Geoffrey Hill.
Peter McDonald's second collection of poetry was Adam's Dream (1996); a third, Pastorals, was published by Carcanet in 2004. His next collection, The House of Clay, appeared from Carcanet at the beginning of 2007.