Erich Peter was born in 1919 into a working-class family. He took part in World War II, being taken prisoner by the American forces in 1945. Shortly after the end of the war, Peter joined the Communist Party of Germany. In 1948, he joined the Volkspolizei, earning promotions in the force and becoming head of a technical school for armored troops in Erfurt. He was educated in the Military Academy of the General Staff of the Armed Forces of the Soviet Union. Upon graduating in 1956, Peter was transferred to the National People's Army.
