Peace got his start in politics as a protégé of Assemblyman Larry Kapiloff. Peace served in the California State Assembly from 1982–1992 and the California Senate from 1993–2002. He wrote the electricity deregulation bill that many believed resulted in the California electricity crisis of 2000 and 2001. The "Steve Peace Death March", as it was known, caused many legislators to switch their votes to support deregulation, and he took credit for being "the father of deregulation". The energy crisis was enough to cause him to abandon a proposed run for California Secretary of State. As part of his campaign to distance himself from the energy crisis, he posted a short video on his state website which included several clips of him opposing the type of deregulation which was eventually included in the energy bill. In the years after the energy crisis, information about market abuse by Enron and ineffective federal oversight by the Federal Energy Regulatory Commission supports Peace's contention that the crisis was not, as pundits claimed at the time, a result of "his" energy bill.
Peace is currently senior advisor for San Diego Padres owner John Moores, chairman of the board of directors for the California Independent Voter Project and CEO of Killer Tomatoes Entertainment. He is currently married to his wife Cheryl and has three sons.