Peabody is perhaps best known as one of the founding editors for Gargoyle Magazine, which he largely funded with his own income. He is also editor for the anthology series Mondo and runs a small press called Paycock Press. Paycock Press was originally established in 1976 to publish Gargoyle Magazine, but it also has released a number of anthologies and works by individual authors.
Peabody's own fiction and poetry is often set in Washington, D.C. and the surrounding region. It is often noted for strong influences from the Beat Generation and experimental authors of the 1960s like Ken Kesey.
During his writing and publishing career, Peabody has taught fiction writing for the University of Maryland, University of Virginia, Johns Hopkins University, and the Writer's Center. In addition, Peabody has taught creative writing courses and workshops at St. John's College, Writer's Center, Georgetown University, and University of Maryland.