In 1964 he became Assistant Director at the Royal Court and Associate Director in 1970, best known there as the director of three hitherto underrated plays by D. H. Lawrence, presented as a group in 1968. In 1969 the Royal Court also presented two of his own first plays, The Sleepers' Den and Over Gardens Out, "which revealed that Gill could evoke with economy of means and lyrical skill the circumstances of his Cardiff boyhood."
His first Riverside production was a staging of his own version of Chekov's The Cherry Orchard, which opened to universal press acclaim on 12 January 1978 (starring Judy Parfitt as Ranevskaya and Julie Covington as Varya, again with a setting designed by William Dudley).
Writing for The Sunday Times, theatre critic Bernard Levin said: "It is good to salute the opening of a new theatre; it is thrice good to be able to do so with almost unqualified praise for its first production. At the Riverside Studios, Peter Gill (who is in charge of the whole enterprise) has directed The Cherry Orchard with a cast so astonishingly suitable that I began, hallucinatorily, to believe that they had been assembled first, and that Chekhov had then written the play round them. What is more, they are achieving this effect on an impossible stage; it is seventy-five feet wide (the players have to sprint, never mind run, if they are to get off at all), absurdly shallow, and lacking even the most rudimentary trappings in the way of flies, a thrust or even wings....Mr Gill and his cast have sought success in the only place it can be found: inside themselves and the play. The effect is magical; The Cherry Orchard has almost never, in my experience, been at once so harrowing and so glittering; nor its fragile rhythms so finely, surely spun, its development so natural, human and real."
When Gill left Riverside in 1980 to be an Associate Director at the National Theatre, a West London theatre critic John Thaxter wrote: "It is no exaggeration to say that Gill's four years as director have taken Riverside to a leading position in British theatre; both with his own productions (notably The Cherry Orchard and this year's Julius Caesar) and as a generous host to world theatre giants: Tadeusz Kantor and Athol Fugard among them....It would also be fair to say that the major portion of the subsidies making all this possible came from the Hammersmith Council, which this year alone provided £200,000 to Riverside, although its audience is drawn from far and wide." 
As an Associate Director of the National Theatre 1980-1997, Gill also founded the National Theatre Studio in 1984, which he ran until 1 October 1990. In his own words: "When I set up the National Theatre Studio the development and analysis of acting was a central part of the work, so that, along with commissioning writers, developing directors and designers, investigating non-text based work, and producing work for the main house, the practice and analysis of acting skills seemed an essential part of any programme of work that was in part concerned with process."
His involvement with the studio was ended by Richard Eyre, who noted in his diary at the time: "Peter's aesthetic is precise, fastidious, exclusive, which is his virtue as a director, but the Studio has to embrace talents that he disapproves of. I felt strongly how much I'd miss him, his drollery, his waspishness, his scorn, his occasional generosity, and his perceptive intelligence, often wrapped in almost impenetrable obliquities. And his apparently psychic ability to know about shows in detail (and criticise them) without having seen them.".
Gill is gay. He lived from the 1960s until 2006 in a small flat in the Thameside house formerly belonging to George Devine and later bought by playwright Donald Howarth and his civil partner George Goetschuis. Gill gets several mentions in the diary of Joe Orton, for whom he directed a double bill of former television plays by Orton at the Royal Court called 'Crimes of Passion'. Orton visited him at home 11 April 1966 when he says Gill made him a curious lunch out of a tin and he also met Donald Howarth.