Peacock met Percy Bysshe Shelley in 1812, and the two became such close friends that Shelley made Peacock executor of his will. Peacock spent several months near the Shelleys at Great Marlow in 1817, a period of great importance to his development as a writer. The ideas that lie behind many of the witty dialogues in his books probably found their origin in the conversation of Shelley and his friends. Peacock's essay The Four Ages of Poetry (1820) provoked Shelley's famous Defence of Poetry (written 1821, published 1840).

Peacock considered his novels to be “comic romances.” Headlong Hall (1816), the first of his seven novels, already sets the pattern of all of them: characters seated at table, eating and drinking, and embarking on learned and philosophical discussions in which many common opinions of the day are criticized.

In his best-known work, Nightmare Abbey (1818), romantic melancholy is satirized, with the characters Scythrop drawn from Shelley, Mr. Flosky from Samuel Taylor Coleridge, and Mr. Cypress from Lord Byron.

Peacock worked most of his life for the East India Company. He was an able administrator, and in 1836 he succeeded James Mill as chief examiner, retiring on a pension in 1856.