The city was first settled by John Hays in 1830 and developed a reputation as a river port, but was overshadowed by neighboring LaSalle's efforts with their own canal port. After the canal closed to barge traffic, Peru regained their reputation. It was organized in 1838 and incorporated in 1851. The coal and zinc mining were part of the community's success, which lead to a zinc manufacturing plant.

Some of the better-known businesses in Peru include Maze Lumber and Nail, which has made its own nails since 1848, Carus Chemical Company (the world leader in producing potassium permanganate), American Nickeloid, and was home to the Western Clock Company (also known as Westclox) until that company closed its doors in the late 1970's after making the Big Ben alarm clock for over 60 years.

One of Peru's residents would up with international acclaim. Maud Powell was a world-reknown violin who was the first American to gain this rank because of her skill and virtuosity. A statue of her is prominently displayed in downtown Peru.