Jackson was born on 31 October 1961 in Wellington and was raised at the nearby coastal town of Pukerua Bay. His parents—Joan (née Ruck), a factory worker and housewife, and William "Bill" Jackson, a wages clerk—were emigrants from England. Bill Jackson was a veteran of the Siege of Malta in World War II.
As a child, Jackson was a keen film fan, growing up on Ray Harryhausen films, as well as finding inspiration in the television series Thunderbirds and Monty Python's Flying Circus. After a family friend gave the Jacksons a Super 8 cine-camera with Peter in mind, he began making short films with his friends. Jackson has long cited King Kong as his favourite film, and around the age of nine he attempted to remake it using his own stop-motion models.
Also, as a child Jackson made a WWII epic called "The Dwarf Patrol" seen on the Bad Taste bonus disc which featured his first special effect of poking pinholes in the film for gun shots, and a James Bond spoof named Coldfinger. Most notable though was a 20-minute short called The Valley, which won him a special prize because of the shots he used.
In school, Jackson expressed no interest in sports. His classmates also remember him wearing a duffle coat with "an obsession verging on religious". He had no formal training in film-making, but learned about editing, special effects and make-up largely through his own trial and error. As a young adult, Jackson discovered the work of author J. R. R. Tolkien after watching The Lord of the Rings (1978), an animated film by Ralph Bakshi that was a part-adaptation of Tolkien's fantasy trilogy. When he was 16 years old, Jackson left school and began working full-time as a photo-engraver for a Wellington newspaper, The Evening Post. For the seven years he worked there, Jackson lived at home with his parents so he could save as much money as possible to spend on film equipment. After two years of work Jackson bought a 16 mm camera, and began shooting a film that later became Bad Taste.
Jackson has long cited several films as influences. It is well known that Jackson has a passion for King Kong, often citing it as his favourite film and as the film that inspired him early in his life. Jackson recalls attempting to remake King Kong when he was 12. At the 2009 San Diego Comic-Con International, while being interviewed alongside Avatar and Titanic director James Cameron, Jackson said certain films gave him a "kick". He mentioned Martin Scorsese's crime films Goodfellas and Casino, remarking on "something about those particular movies and the way Martin Scorsese just fearlessly rockets his camera around and has shot those films that I can watch those movies and feel inspired." Jackson said the 1970 film Waterloo inspired him in his youth. Other influences include George Romero and Sam Raimi.
To date he has won many film awards and has also been nominated for several.