He was born to Jewish parents in Dresden, Germany, the writer and actress Salka Viertel and the writer Berthold Viertel. In 1928, his parents moved to Santa Monica, California where Viertel grew up with his brothers, Hans and Thomas. The home in Santa Monica Canyon was the site of salons and meetings of the Hollywood "intelligentsia" and the émigré community of European intellectuals, particularly at the Sunday night tea parties given by Viertel's mother.[1] However, Viertel identified more with Southern California youth culture than with the European one he was exposed to. "The physical aspect of European intellectuals was so totally different from what an American kid wants to be," he told the International Herald Tribune in 1992. "I knew Bert Brecht was close to being a genius, but he was a funny-looking man to me."

Viertel graduated from Dartmouth College in 1941. He was an enlisted man in the United States Marines in the South Pacific for part of World War II, but after being assigned office work in California (in his memoirs he joked he was a "Remington Raider" in reference to the typewriters they used), he sought and eventually gained work with the O.S.S. as a second lieutenant. His native German language skills were put to use in Nazi-controlled Europe. Viertel later co-wrote a play titled "The Survivors" with writer Irwin Shaw based upon experiences related to World War II.

Viertel was most famous for his novel White Hunter Black Heart, which was made into a film starring Clint Eastwood in 1990. It is a thinly-disguised account of Viertel's experiences working with John Huston while he made the film The African Queen. The central character is scriptwriter Pete Verrill while the Huston character is called John Wilson. Viertel's opinion of the finished film was tempered by his idea that Huston himself would have preferred a portrayal with more sarcasm.

Of his screenwriting work for Hollywood productions, Viertel said that it was primarily a vehicle for income so that he could continue to write novels.Though he worked closely with movie professionals that he liked such as Billy Wilder and Huston, Viertel said there was always creative tension.

Viertel was twice married. His first wife was Virginia Ray "Jigee" Schulberg, the ex-wife of the novelist and screenwriter Budd Schulberg; she was pregnant with their only child, Christine, when Viertel abandoned her to live with the fashion model Bettina. His second wife was the actress Deborah Kerr (from July 23, 1960 until Kerr's death on October 16, 2007); by her, he had two stepdaughters, Melanie and Francesca Bartley. He died nineteen days after Kerr in Marbella, Spain; the cause was lymphoma.

At the time of his death, it was reported that a novel based upon his OSS experiences from World War II was in completed form, as was also a second volume of memoirs.

A filmed documentary by director Michael Scheingraber was in production at the time of Viertel's death. Titled "Peter Viertel - Between the Lines" the film is based upon over 400 minutes of recorded interviews with him.