Peter began to reign at the age of sixteen, and found himself subjected to the control of his mother and her favourites. Peter was to be married to Joan, the daughter of Edward III of England, but on the way to Castile, she travelled through cities infested with plague, ignoring townspeople who had warned her not to enter the town. Joan soon contracted the disease and died.

At first he was controlled by his mother, but emancipated himself with the encouragement of the minister Albuquerque and became attached to María de Padilla, marrying her in secret in 1353. María turned him against Albuquerque. In the summer of 1353 the king was practically coerced by his mother and the nobles into marrying Blanche of Bourbon, but deserted her at once. This marriage necessitated Peter's denying that he had married María, but his relationship with her continued and she bore him four children. He also apparently went through the form of marriage with a lady of the family of Castro, who bore him a son, and then deserted her. A period of turmoil followed in which the king was for a time overpowered and in effect imprisoned. The dissension within the party striving to coerce him enabled him to escape from Toro, where he was under observation, to Segovia.

In 1361 Blanche died in Medina Sidonia. Legend states that Peter murdered her. One version of the story says she was poisoned, another that she was shot with a crossbow.

From 1356 to 1366 he engaged in constant wars with Aragon in the "War of the Two Peters", in which he showed neither ability nor courage. It was during this period that he perpetrated the series of murders which made him notorious. In 1366 began the calamitous Castilian Civil War which would see him dethroned. He was assailed by his bastard brother Henry of Trastamara at the head of a host of soldiers of fortune, including Bertrand du Guesclin and Hugh Calveley, and abandoned the kingdom without daring to give battle, after retreating several times (first from Burgos, then from Toledo, and lastly from Seville) in the face of the oncoming armies. Peter fled, with his treasury, to Portugal, where he was coldly received by his uncle, King Peter I of Portugal, and thence to Galicia, in the northern Iberian Peninsula, where he ordered the murder of Suero, the archbishop of Santiago, and the dean, Peralvarez.

Peter's rival Henry of Trastamara continuously depicted Peter as "King of the Jews," and had some success in taking advantage of Castilian anti-Semitism. Henry of Trastamara instigated pogroms, beginning a period of anti-Jewish riots and forced conversions in Castile that lasted approximately from 1370 to 1390. Peter took forceful measures against this, including the execution of at least five anti-Jewish leaders of a riot.

In the summer of 1366, Peter took refuge with Edward the Black Prince, who restored him to his throne in the following year after the Battle of Nájera. But he disgusted his ally with his faithlessness and ferocity, as well as his failure to repay the costs of the campaign, as he had promised to do. The health of the Black Prince broke down, and he left the Iberian Peninsula.

Meanwhile Henry of Trastamara returned to Castile in September of 1368. The cortes of Burgos recognized him as King of Castile. Others followed, including Cordoba, Palencia, Valladolid, and Jaen. Galicia and Asturias, on the other hand, continued in their support of Peter. As Henry made his way toward Toledo, Peter, who had retreated to Andalusia, chose to confront him in battle. On March 14, 1369, the forces of Peter and Henry met at Montiel, a fortress then controlled by the Order of Santiago. Henry prevailed with the assistance of Bertrand du Guesclin. Peter took refuge in the fortress, which being controlled by a military order of Galician origin, remained faithful to Peter. Negotiations were opened between the holed-up Peter and his besieger, Henry. Peter met with du Guesclin, who was acting as Henry's envoy. Peter appealed to du Guesclin's well-known treacherous side. He offered du Guesclin 200,000 gold coins and several towns, including Soria, Almazan, and Atienza to betray Heney. Ever vigilant in his opportunistic ways, du Guesclin informed Henry of the offer and immediately bargained for greater compensation from Henry to betray the conspiracy proposed to him by the imprisoned monarch.

Having made a deal with Henry, Du Guesclin returned to Peter. Under the guise of accepting his proposal to betray Henry, du Guesclin led Peter to his tent on the night of March 23, 1369. Henry was waiting. The historian Lopez de Ayala described the encounter as follows: Upon entering du Guesclin's tent, Henry "saw King Peter. He did not recognize him because they had not seen each other for a long time. One of Bertrand's men said 'This is your enemy.' But King Henry asked if it was he and ... King Peter said twice, 'I am he, I am he.' Then King Henry recognized him and hit him in the face with a knife and they ... fell to the ground. King Henry struck him again and again." Having dispatched his half brother, Henry left Peter's body unburied for three days, during which time it was subjected to ridicule and abuse.

Popular memory generally views Peter as a vicious monster. Much of Peter's reputation comes from the works of the chronicler López de Ayala who served Peter's usurper. After time passed, there was a reaction in Peter's favour, and an alternative name was found for him. It became a fashion to speak of him as El Justiciero, the executor of justice (the Lawful). Apologists were found to say that he had only killed men who themselves would not submit to the law or respect the rights of others. Peter did have his supporters. Even Ayala confessed that the king's fall was regretted by the merchants, who enjoyed security under his rule. The English, who backed Peter, also remembered the king positively. Geoffrey Chaucer visited Castile during Peter's reign and lamented the monarch's death in The Monk's Tale, part of The Canterbury Tales. (Chaucer's patron, John of Gaunt, 1st Duke of Lancaster, fought on Peter's side in his struggle to reclaim the throne.)

The great original but hostile authority for the life of Pedro the Cruel is the Chronicle of the Chancellor Pedro López de Ayala (1332 – 1407). To put it in perspective there is a biography by Prosper Mérimée, Histoire de Don Pedro I, roi de Castille (1848), and a modern history setting Peter in the social and economic context of his time by Clara Estow (Pedro the Cruel of Castile (1350 – 1369), 1995).

Strictly speaking, Pedro was not defeated by Henry but by the opposing aristocracy; the nobles accomplished their objective of enthroning a weaker dynasty (the House of Trastámara), much more amenable to their interests. Most of the bad stories about Peter are likely to be colored by Black Legend, coined by his enemies, who finally succeeded in their rebellion. The Chancellor López de Ayala, the main source for Pedro's reign, was the official chronicler of the Trastámara, a servant of the new rulers and of Pedro's aristocratic adversaries.

The change of dynasty can be considered as the epilogue of the first act of a long struggle between the Castilian monarchy and the aristocracy; this struggle was to continue for more than three centuries and come to an end only under Charles I of Spain, the grandson of Ferdinand II of Aragon (Ferdinand V of Castile) and Isabella I of Castile (The Catholic Monarchs), in the first quarter of the 16th century.