Peckham is a Saxon place name meaning the village of the River Peck, a small stream that ran through the district until it was enclosed in 1823. Archaeological evidence indicates earlier Roman occupation in the area, although the name of this settlement is lost.

Peckham appears in Domesday Book of 1086 as Pecheham. It was held by the Bishop of Lisieux from the Bishop of Bayeux. The manor was owned by King Henry I who gave it to his son Robert, Earl of Gloucester. When Robert married the heiress to Camberwell the two manors were united under royal ownership.

Peckham became popular as a wealthy residential area by the 16th century. By the 18th century the area was a more commercial centre and attracted industrialists who wanted to avoid paying the expensive rents in central London. Peckham also boasted extensive market gardens and orchards growing produce for the nearby markets of London.

The village was the last stopping point for many cattle drovers taking their livestock for sale in London. The drovers stayed in the local inns (such as The Red Cow) while the cattle were safely secured overnight in holding pens. Most of the villagers were agricultural or horticultural workers but with the early growth of the suburbs an increasing number worked in the brick industry that exploited the local London Clay.

At the beginning of the 19th century Peckham was a 'small, quiet, retired village surrounded by fields'. Since 1744 stagecoaches had travelled with an armed guard between Peckham and London to give protection from highwaymen. The rough roads constrained traffic so a branch of the Grand Surrey Canal was proposed as a route from the Thames to Portsmouth. The canal was built from Surrey Commercial Docks to Peckham before the builders ran out of funds in 1826.

Before Peckham Rye railway station was opened in 1865 the area had developed around two centres: north and south. In the north, housing spread out to the south of the Old Kent Road including Peckham New Town built on land owned by the Hill family (from whom the name Peckham Hill Street derives). In the south, large houses were built to the west of the common land called Peckham Rye and the lane that led to it.

North Peckham was heavily redeveloped in the 1960s, consisting mainly of high-rise flats to rehouse people from dilapidated old houses. It was popular on its completion for offering a high quality and modern standing of living. However, high unemployment and a lack of economic opportunities led to urban decay and a period of decline in the late 1970s. The North Peckham Estate became one of the most deprived residential areas in Western Europe. Vandalism, graffiti, arson attacks, burglaries, robberies and muggings were commonplace, and the area became an archetypal London sink estate. As a result, the area was subjected to a £290 million regeneration programme in the late 1990s and early 2000s. By 2002, 90% of the redevelopment was complete. The new homes were better laid out and offered improved security.

Since the 1990s the European Union has invested heavily in the regeneration of the area; partly funding the futuristic, award-winning Peckham Library, a new town square and swathes of new housing to replace the North Peckham Estate. Throughout the area state funding is being provided to improve the housing stock and renovate the streets. This includes funding for public arts projects like the Tom Phillips mosaics on the wall of the Peckham Experiment restaurant and the South London Gallery.