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In the pilot episode, "Smoke Gets in Your Eyes", which takes place in March 1960, Peggy begins work as a secretary for Don Draper (Jon Hamm). Her supervisor, office manager Joan Holloway (Christina Hendricks), directs her in her duties as well as offers personal advice, which includes referring her to a gynecologist to obtain a prescription for birth control pills. When Peggy initially meets account executive Pete Campbell (Vincent Kartheiser), he makes rude comments about her appearance, and Don defends her. Later that night, after his bachelor party, Pete shows up at Peggy's apartment drunk. Despite Pete's offensive remarks earlier, Peggy sleeps with him. Months later, Peggy and Pete have another sexual encounter on Pete's office couch, early one morning before other employees arrive.

In "Babylon", Sterling Cooper executive Freddy Rumsen (Joel Murray) notices Peggy's sharp mind and creativity during a focus group for Belle Jolie lipstick. After hearing Peggy's insightful remarks during a brainstorming session, Rumsen comments that her performance "was like watching a dog play the piano". She is asked to write some copy for the campaign in addition to her other duties. The campaign is a success, and she is made to work on other campaigns. As a result, she is soon promoted to Junior Copywriter and ceases being Don's secretary. She reveals herself to be highly ambitious, and her approach to her work is compared to Don's. Later, after Rumsen is fired, Peggy convinces Senior Partner Roger Sterling (John Slattery) to give her Rumsen's office.

During her first year at Sterling Cooper, Peggy begins to gain weight, which appears to confuse her. The male account executives begin to mock her, and Joan makes unkind remarks to her about her appearance in an attempt to encourage her to lose weight and dismisses her success at copywriting. When Peggy is promoted, she begins experiencing severe abdominal pain; she attributes it to a "bad sandwich" from the office cart and heads to St. Mary's Hospital in Brooklyn. She is shocked and in denial when informed she's actually in labor. As she gets up to leave, she collapses, and the hospital staff moves her into a hospital room in labor and delivery. She gives birth to a healthy baby boy, but she refuses to hold him or even look at him.

Season 2 begins 15 months later, on February 14, 1962, with a slim Peggy and no mention of the birth. Her long absence (not shown) is a mystery to Sterling Cooper's employees. One co-worker jokes during a meeting that "Draper knocked her up and she's dropped nine pounds, eight ounces." Pete has heard through office gossip that Peggy went to a fat farm.

It is revealed later in the season, through a series of flashbacks, that Peggy's family has covered up Peggy's sudden disappearance from Sterling Cooper. They tell Don that Peggy is in quarantine with tuberculosis, but she is actually in a mental hospital because she has had a break with reality after giving birth. Don becomes suspicious and seeks her out at the hospital. He encourages her to do whatever the doctors are asking her to do and move forward as if nothing ever happened, adding, "It will shock you how much this never happened."

Peggy's out-of-wedlock pregnancy causes tension with her deeply Catholic mother, Katherine, and sister, Anita. When a visiting parish priest, Father Gill (Colin Hanks), befriends Peggy after seeking out her advice regarding public speaking, Anita goes to confession and tells him that she hates and resents Peggy for seducing a married man, getting pregnant and abandoning her child, then pretending as though nothing happened. Afterward Father Gill repeatedly tries to persuade Peggy to take confession, which Peggy consistently declines to do. After season two, she is no longer seen attending mass, but notably performs the sign of the cross before taking her first plane flight in "Waterloo."