Donald Oliver Peterson, a liberal leader of the anti-Vietnam War faction of the Wisconsin Democratic Party during the late 1960s and early 1970s, was born in Renville, Minnesota, on March 9, 1925. He graduated from high school in Minneapolis in 1943, and served in the South Pacific during World War II as a navigator with the Army Air Force. After the war, he attended the University of Minnesota from 1946 to 1947 with a major in engineering and then spent an additional year studying economics at Macalester College. In 1948, he left school to go into the petroleum trucking business with his father. When the business was sold in 1954, Peterson became a salesman with the Standard Oil Company in Minnesota. From 1957 through 1962, he was a sales representative with the Foster-Bell Company of Aberdeen, South Dakota. In 1963 he moved to Wisconsin as a law book salesman. Later he began working in the food products industry, becoming general sales manager and executive vice president of Black River Dairy Products, Inc. and eventually vice president of Dadco Food Products of Eau Claire.

Although a prominent businessman, Peterson is best known for his activities within the Democratic Party. He began his political life while in his twenties as a member of the Young Democrats and as a precinct committeeman in the Minnesota Democratic Farm Labor Party. In 1962, he managed George McGovern's senatorial campaign in South Dakota. After moving to Wisconsin, Peterson continued his political activity in the Americans for Democratic Action, of which he was Wisconsin chairman and national board member. From 1967 to 1968, he was chairman of the l0th District Democratic organization. During the late 1960s, Peterson emerged as a leader of the state Democrats opposed to U.S. involvement in Vietnam, and in 1967, he helped to organize Concerned Wisconsin Democrats that eventually grew into the National Conference of Concerned Democrats. In this capacity, Peterson was instrumental in persuading Senator Eugene McCarthy to enter the 1968 presidential race. As co-chair of the Wisconsin McCarthy for President Committee and chairman of the Wisconsin delegation to the national convention, Peterson gained national recognition as a leader of the protest against the more conservative members of the party organization. In addition, Peterson spoke out on the floor of the National Convention against the actions of the Chicago police in regard to peace demonstrations that took place during the convention, and he led a dramatic march by members of the delegation to protest the police actions. After McCarthy lost the presidential nomination, Peterson declined the suggestion by some McCarthy supporters that his own name be placed in nomination for the vice-presidency.

Peterson remained extremely active in politics on both the local and national level for the next six years. He was co-founder, co-chair, and national steering committee member of the New Democratic Coalition, a national organization formed after the 1968 convention by dissatisfied members of the party who were committed to making it more responsive to its members. Peterson also worked for reform as a member of two special commissions of the national organization. From 1969 to 1972, he was a member of the Commission on Rules (also known as the O'Hara Commission), which was organized to evaluate the party's convention rules and recommend changes to the National Committee prior to the 1972 convention. From 1973 to 1974, Peterson worked as a member of the Charter Commission (also known as the Sanford Commission), a group authorized by the 1972 convention to formulate a national constitution for the party.

Maintaining no personal interest in elective office, Peterson declined to run for lieutenant governor on the Democratic ticket in 1968. However, two years later, he ran unsuccessfully for the gubernatorial nomination against Patrick J. Lucey. The two men differed little on issues, and the race was considered a contest between the long-time party activists and the newcomers. From 1971 through 1976, Peterson was national committeeman for Wisconsin. For reasons arising from his work in the 1962 senatorial campaign, Peterson did not support McGovern in the 1972 presidential primary, instead working as Midwest coordinator for Edmund Muskie. In 1974, Peterson was a delegate to the Conference on Democratic Party Organization and Policy.