McPhee was educated at Caulfield Grammar School and Trinity College while studying at the University of Melbourne, where he earned his Bachelor of Arts and Master of Arts degrees, a Diploma in Education and a Doctor of Philosophy degree. He later taught at LaTrobe University (1975–79) and the Victoria University of Wellington (1980–86) before teaching history at Melbourne. He specialises in research on French history and the French Revolution, having published numerous books on the subject. His academic management positions at Melbourne have included working as Deputy Dean of the School of Graduate Studies, head of the Department of History and President of the university's academic board. In 2003 he became the deputy vice-chancellor for academics and in 2007 was appointed as the inaugural provost. As part of this role he has been responsible for planning and introducing the university's controversial new Melbourne Model, which is designed to maintain consistency with the Bologna Accords' structure for European higher education. In 2003 he was awarded the Centenary Medal for services to education. McPhee retired from the University of Melbourne on 14 June 2009 but continues to serve as a professorial fellow. In 2014 Peter McPhee, with the University of Melbourne and Coursera, developed a free online course on the French Revolution. The course follows the chapters in his eBook, The French Revolution.