Peters started acting on stage, appearing in musical productions such as Porgy and Bess (1943). In his early film roles—in Carmen Jones (1954) and a film adaptation of Porgy and Bess (1959)—he played a villain, but he avoided typecasting when he played a gay trumpet player in The L-Shaped Room (1962). That same year he gave a moving performance as a man falsely accused of rape in the film adaptation of Harper Lee's novel To Kill a Mockingbird (published 1960). Peters also appeared in such films as The Pawnbroker (1965) and Soylent Green (1973). He starred as Admiral Cartwright in two Star Trek movies, Star Trek IV: The Voyage Home (1986) and Star Trek VI: The Undiscovered Country (1991).

He also appeared frequently on television, with noteworthy performances in the made-for-TV movie Roots: The Next Generations (1979), the television series Star Trek: Deep Space Nine (1996–98), and numerous animated shows for children. He continued to act on stage even after his initial success in film, taking the lead role in a Broadway revival of Maxwell Anderson (Anderson, Maxwell)'s Lost in the Stars (1972; filmed 1974), for which he received a Tony Award nomination. He also performed in Driving Miss Daisy (1989).