Fanning, 34, broke down in an interview after competing in the third and fourth rounds of the Pipeline event in Hawaii.
"I've just got some personal stuff going on at home right now," the Australian said, before being comforted by a World Surf League (WSL) announcer.
Earlier this year, Fanning escaped a shark attack in South Africa.
Fanning later spoke about his brother on social media.
"I am so grateful for the incredible love and well wishes that have come my way since learning of my eldest brother's passing this morning," Fanning said on Instagram.
"Like all my big brothers, Peter will always be a hero to me.
"Today was one of the most challenging days of my life but I knew I could find the strength to take part in the final event of the season because that's what Pete would want."
It has not been made public how or where Peter Fanning died.
In July, his mother said she was overwhelmed by the live televised footage of his close encounter with the shark.
"I just saw my boy going down. That was absolutely terrifying because I have lost a son before," Liz Osborne told Australian media.
Fanning's other brother, Sean, died in a car accident in 1998.
Fanning returned to the water in his native Australia six days after the attack.
Current number one surfer Mick Fanning has edged closer to his fourth world title despite the death of his brother hours before the winning heat.