Ustinov was born in Swiss Cottage, London. His father, Iona (Jona) Baron von Ustinov, was of Russian, German and Ethiopian noble descent, and had served as a lieutenant in the German Air Force in World War I, worked as a press officer at the German Embassy in London in the 1930s, and was a reporter for a German news agency.

In 1935 he began working for the British intelligence service MI5 and became a British citizen, thus avoiding internment or deportation during the war. (Peter Wright mentions in his book Spycatcher that Klop was possibly the spy known as U35; Ustinov says in his autobiography that his father hosted secret meetings of senior British and German officials at their London home.)

Ustinov's great-grandfather Moritz Hall, a Jewish refugee from Cracow, and later a convert and collaborator of Swiss and German missionaries in Ethiopia, married into a German-Ethiopian family.

Ustinov's mother, Nadia (Nadezhda) Leontievna Benois, was a painter and ballet designer of Russian, French and Italian ancestry. Her father Leon Benois was an imperial Russian architect and owner of Leonardo da Vinci's painting Madonna Benois.

His brother Alexandre Benois was a stage designer who worked with Stravinsky and Diaghilev. Their paternal ancestor Jules-César Benois was a chef who had left France for St Petersburg during the French Revolution and became a chef to Tsar Paul.

Ustinov was educated at Westminster School and had a difficult childhood because of his parents' constant fighting. While at school he considered anglicizing his name to "Peter Austin" but was counselled against it by a fellow pupil who said that he should “Drop the ‘von’ but keep the ‘Ustinov’”.

After training as an actor in his late teens, along with early attempts at playwriting, he made his stage début in 1938 at the Players' Theatre, becoming quickly established. He later wrote, "I was not irresistibly drawn to the drama. It was an escape road from the dismal rat race of school."

Ustinov served as a Private in the British Army during World War II, including service as batman to David Niven. He also appeared in propaganda films, debuting in One of Our Aircraft is Missing (1942) in which he was required to deliver lines in English, Latin and Dutch.

After the war he branched out into writing; his first major success was with The Love of Four Colonels in 1951. He starred alongside Humphrey Bogart and Aldo Ray in We're No Angels (1955). His career as a dramatist continued alongside his acting career, his best-known play being Romanoff and Juliet (1956). His film roles include Roman emperor Nero in Quo Vadis? (1951), Captain Vere in Billy Budd (1962), Lentulus Batiatus in Spartacus (1960), an old man surviving a totalitarian future in Logan's Run (1976), and, in a half dozen films, Hercule Poirot, a part he first played in Death on the Nile (1978).

Ustinov voiced the well-known anthropomorphic lion Prince John of the 1973 Disney animated movie Robin Hood. He also worked on several films as writer and occasionally director, including The Way Ahead (1944), School for Secrets (1946), Hot Millions (1968) and Memed, My Hawk (1984).

He won Academy Awards for Best Supporting Actor for his roles in Spartacus (1960) and Topkapi (1964). He could arguably be considered the first man of known African descent to have won an Oscar. He also won one Golden Globe award for Best Supporting Actor for the film Quo Vadis? (he set the Oscar and Globe statuettes up on his desk as if playing doubles tennis; the game was also a love of his life, as was ocean yachting). Furthermore, Ustinov was the winner of three Emmys, one Grammy, and was nominated for two Tony Awards.

Between 1952 and 1955 Ustinov starred alongside Peter Jones in the BBC radio comedy In All Directions. The show featured Ustinov and Jones as themselves in a car in London perpetually searching for Copthorne Avenue. The comedy derived from the characters they met along the way, often also played by themselves.

The show was unusual for the time as it was largely improvised rather than scripted. Ustinov and Jones improvised on to a tape which was then edited for broadcast by Frank Muir and Denis Norden who also sometimes took part. Possibly the favourite characters were Morris and Dudley Grosvenor, two rather stupid East End spivs whose sketches always ended with the phrase "Run for it Morry" (or Dudley as appropriate.) Sadly no recording is known to survive.

During the 1960s, with the encouragement of Sir Georg Solti, Ustinov directed several operas including Puccini's Gianni Schicchi, Ravel's L'Heure Espagnole, Schonberg's Erwartung, and Mozart's Magic Flute. Further demonstrating his great talent and versatility in the theater, Ustinov later did set and costume production for Don Giovanni.

His autobiography, Dear Me (1977), was well received and saw him describe his life (ostensibly his childhood) while being interrogated by his own ego, with forays into philosophy, theater, fame, and self-realisation. In concluding, Ustinov muses "We have gone through much together, Dear Me, and yet it suddenly occurs to me we don't know each other at all".

In the later part of his life (from 1969 until his death), his acting and writing tasks took second place to his work on behalf of UNICEF, for which he was a Goodwill Ambassador and fundraiser. In this role he visited some of the neediest children and made use of his ability to make just about anybody laugh, including many of the world's most disadvantaged children. "Sir Peter could make anyone laugh," UNICEF Executive Director Carol Bellamy is quoted as saying. "His one-man show in German was the funniest performance I have ever seen – and I don’t speak a word of German."

Ustinov also served as President of the World Federalist Movement from 1991 until his death. He once said, "World Government is not only possible, it is inevitable; and when it comes, it will appeal to patriotism in its truest, in its only sense, the patriotism of men who love their national heritages so deeply that they wish to preserve them in safety for the common good."

He is best-known to many Britons as a chat-show guest, a role to which he was ideally suited. Towards the end of his life he undertook some one-man stage shows in which he let loose his raconteur streak - he told the story of his life, including some moments of tension with the national society he was born into (as just one example, he took a test as a child which asked him to name a Russian composer; he wrote Rimsky-Korsakov but was marked down, told the correct answer was Tchaikovsky since they had been studying him in class, and told to stop showing off).

A car enthusiast since the age of four, he owned a succession of interesting machines ranging from a Fiat Topolino, several Lancias, a Hispano-Suiza, a pre-selector Delage and a special-bodied Jowett Jupiter. He made records like Phoney Folklore which included the song of the Russian peasant “whose tractor had betrayed him” and his "Grand Prix of Gibraltar" was a vehicle for his creative wit and ability at car engine sound-effects and voices.

He spoke English, French, Spanish, Italian, German and Russian fluently, as well as some Turkish and modern Greek. He was proficient in accents and dialects in all his languages.

In the late 1960s, he became a Swiss citizen to avoid the British tax system of the time which taxed the earnings of the wealthy at up to 90 per cent. However, he was knighted in 1990, and was appointed Chancellor of the University of Durham in 1992, having previously served as Rector of the University of Dundee in the late 1970s (a role in which he moved from being merely a figure-head to taking on a political role, negotiating with militant students).

Ustinov was a frequent defender of the Chinese government, stating in an address to the University of Durham in 2000, "People are annoyed with the Chinese for not respecting more human rights. But with a population that size it's very difficult to have the same attitude to human rights."

In 2003, Durham's postgraduate college (previously known as the Graduate Society) was renamed Ustinov College.

He died on 28 March 2004 of heart failure in a clinic in Genolier, near his home in Bursins, Vaud, Switzerland. He was so well regarded as a goodwill ambassador that UNICEF Executive Director Carol Bellamy spoke at his funeral and represented United Nations Secretary-General Kofi Annan.

Ustinov came to Berlin on a UNICEF mission in 2002 to visit the circle of United Buddy Bears that promote a more peaceful world between nations, cultures and religions for the first time. He was determined to ensure that Iraq would also be represented in this circle of about 140 countries. In 2003, he sponsored and opened the second exhibition of the United Buddy Bears in Berlin.

Amongst his lesser known works, Ustinov presented and narrated the official video review of the 1987 Formula One season. His commentary proved highly entertaining. Ustinov also narrated the documentary series "Wings of the Red Star."

Ustinov gave his name to the Foundation of the International Academy of Television Arts and Sciences for their prestigious Sir Peter Ustinov Television Scriptwriting Award, given annually to a young television screenwriter.

In an interview, he was once asked what he would like it to say on his tombstone, Ustinov replied "Please keep off the grass".