Lalor was born at Tenakill, Queens County, Ireland into a large family, active in Irish politics. His father Patrick, represented Queens County in the House of Commons. Peter was educated in Dublin and became a civil engineer. With political unrest in Ireland, and the chance of getting rich in on the Australian goldfields, he left Ireland with his brother, Richard, and went to Victoria, Australia, in 1852. They worked on building the railway between Melbourne and Geelong. In 1853 Peter went to the Ovens River looking for gold, and Richard went back to Ireland where he later became a member of parliament. Peter Lalor went into business selling wine and tobacco in Melbourne, but decided to go to Ballarat to look for gold in 1854. He set up camp on the Eureka Lead, at East Ballarat, which was settled by many miners from Ireland.