Peters was born Suzanne Carnahan in Spokane, Washington, the elder of two children born to Robert and Abby Carnahan. Her father was a civil engineer of Irish descent while her mother was of French descent. Shortly after her birth, the Carnahan family moved to Portland, Oregon. In 1933, Robert Carnahan was killed in a car accident and the family moved to Los Angeles to live with Peters’ maternal grandmother.  Peters was educated at Laird Hall School for Girls, the LaRue School in Azusa, California, and Flintridge Sacred Heart Academy. While in her senior year at Hollywood High School, Peters began taking drama classes and signed with an agent. After graduating in June 1939, she won a scholarship to the Max Reinhardt School of Dramatic Arts. While performing in a showcase at the school, she was spotted by a talent scout for Warner Bros. and given a screen test. Warner Bros. signed Peters to a contract.

For the first two years of her career, she used her given name of Suzanne Carnahan and played small, often uncredited parts in films such as Meet John Doe (1941). Warner Bros. eventually convinced her to change her name to Susan Peters. By 1942, however, Warner Bros. chose not to renew her contract. A few months after being dropped by Warner Bros., she was contacted by Metro-Goldwyn-Mayer studios to test for a supporting role in the film Tish. She won the role and also signed a contract with M-G-M. Her first substantial role, in Random Harvest (1942), earned her an Academy Award nomination for Best Supporting Actress.  Further impressed, MGM began to groom her for starring roles, casting her in several lesser productions that allowed her to learn her craft. A starring role in Song of Russia (1943) earned her critical acclaim, but the film was not a commercial success. However, in 1944 she was one of ten actors who were elevated from “featured player” status to the studio’s official “star” category; the others included Esther Williams, Laraine Day, Kathryn Grayson, Van Johnson, Margaret O’Brien, Ginny Simms, Robert Walker, Gene Kelly, and George Murphy. An official portrait taken of MGM’s contracted players during this period prominently features Peters sharing the front row with the head of the studio himself, Louis B. Mayer, and alongside such actors as James Stewart, Mickey Rooney, Margaret Sullavan, Katharine Hepburn, Hedy Lamarr, and Greer Garson.

Peters married actor and film director Richard Quine on November 7, 1943. On January 1, 1945, Peters and Quine were duck hunting when a rifle accidentally discharged and she was injured; the bullet lodged in her spinal cord. The accident left her permanently paralyzed from the waist down, which required her to use a wheelchair. Her mother, who had maintained a bedside vigil during her stay in the hospital, died in December 1945.  MGM continued to pay her salary, but, unable to find suitable projects, Peters subsequently left the studio. She returned to the screen in the lead role in Columbia’s The Sign of the Ram (1948), but the film failed to win an audience. She toured in stage productions of The Glass Menagerie and The Barretts of Wimpole Street, and her performances were highly regarded, but her disability made her a difficult actress to cast. Peters’ final role was as the title character in the live television drama Miss Susan. The show was canceled after Peters’ health began to decline.

Peters and her husband Richard Quine adopted a son, Timothy Richard, in 1946. They separated in March 1947 with Peters claiming that Quine was cruel and would not speak to her for days at a time. They were divorced in September 1948. Following her divorce and the end of her career, Peters suffered from depression.  On October 23, 1952, Peters died at Memorial Hospital in Visalia, California at the age of 31. Peters’ doctor attributed her death to a chronic kidney infection, a complication caused by her paralysis, and bronchial pneumonia. He also noted that her death was hastened by dehydration and starvation because, in the last few weeks of her life, Peters had “lost interest” in eating and drinking and had lost the will to live. Her funeral was held on October 27 in Glendale, California, after which she was buried at Forest Lawn Memorial Park next to her mother.  For her contribution to motion pictures, Susan Peters has a star on the Hollywood Walk of Fame at 1601 Vine Street.