Pedersen was born in Copenhagen and brought up in the poor area near Vigerslev Alle. He held radical political beliefs. He joined the International Folk High School in Elsinore in 1933, where he met self-taught painter Else Alfelt. They married in 1934, and their first daughter, Vibeke Alfelt, was born later that year. Else Alfelt encouraged Pedersen to paint, and he first exhibited at the Artists' Autumn Exhibition ("Kunstnernes Efterårsudstilling") in Copenhagen in 1936, where he showed four abstract works. His modernist style was at odds with the socialist realism preferred by his communist friends, who snubbed him: he argued with Bertolt Brecht about his art. His abstract works, with flat planes of colour, emulated the works of cubists and of Paul Klee.