In 1982, Peters returned to the New York stage after an eight-year absence in one of her few non-musical stage appearances, the Off-Broadway Manhattan Theatre Club production of the comedy-drama "Sally and Marsha", for which she was nominated for a Drama Desk Award. She then returned to Broadway as Dot/Marie in the Stephen Sondheim–James Lapine musical "Sunday in the Park with George" in 1984, for which she received her third Tony Award nomination. "The New York Times" theatre critic Frank Rich called her performance "radiant". She recorded the role for PBS in 1986, winning a 1987 ACE Award. Her next role was Emma in Andrew Lloyd Webber's "Song and Dance" on Broadway in 1985, winning her first Tony Award for Best Leading Actress in a Musical. Frank Rich wrote in an otherwise negative review of the show that Peters "has no peer in the musical theater right now."