Peneus was born to Oceanus and Tethys, the eldest of the primordial deities, the vast encircling ocean and his wife, who together produced the three thousand Oceanids, the nymphs of the sea, and the three thousand river gods whose waters ran through every land. He was a Titan by birth, one of the generation of gods who ruled before Zeus and the Olympians overthrew them in the Titanomachy, the war between the old Titans and the young Olympian gods. But unlike his brothers who fought against Zeus, Peneus took no part in the war. He was a river, and rivers do not choose sides. They flow where the earth allows them, and they serve the land rather than the throne. When the war ended and the defeated Titans were cast into Tartarus, the dark pit beneath the earth, Peneus was left untouched, his waters still running free through the plains of Thessaly.

His river rose in the mountains of Pindus, the rugged range that separates Thessaly from Epirus, and flowed eastward through the Vale of Tempe, a narrow gorge between Mount Olympus and Mount Ossa that was said to be the most beautiful place in all of Greece. The Vale of Tempe was sacred to Apollo, and poets from Homer to the Roman lyricists sang of its cypress groves and its springs. Peneus's waters ran through it like a silver thread, and on his banks grew the reeds that the god Pan, the goat-foot lord of Arcadia who played the panpipes, would cut to make his pipes. The nymphs who lived along the river, called the Peneiades, were his daughters or his attendants, and they danced on the banks at dawn, their feet barely touching the water. The river was the lifeblood of Thessaly, and the cities that rose along its course, including the ancient settlement of Peneus, owed their existence to his generosity.

Peneus's most famous child was Daphne, the nymph who swore herself to Artemis, the virgin goddess of the hunt, and who fled from Apollo when the god of music and prophecy fell in love with her. The story of Daphne's transformation is told in the Roman poet Ovid's Metamorphoses, but the Greek roots of the tale are older. Apollo chased Daphne through the forests of Thessaly, and as his breath warmed her neck, she called out to her father, the river god, begging him to destroy the beauty that made her prey. Peneus heard her prayer from his waters and answered. He transformed her into a laurel tree, the daphne in Greek, and Apollo crowned himself with her leaves and made the tree sacred to his worship. The laurel groves that surrounded the oracle at Delphi were said to have been planted from cuttings of the tree that Peneus created, and every victor of the Pythian games wore a wreath of those leaves.

Peneus had other children whose stories are less famous but no less significant. His son Hypseus became the king of the Lapiths, the tribe of Thessaly who lived on the plains near his father's river. Hypseus was the father of Cyrene, the huntress nymph who was carried away by Apollo and became the queen of a Libyan city that bore her name. Peneus was also the father of Stilbe, a nymph who bore a son to Apollo named Lapithes, the eponymous ancestor of the Lapiths themselves. Through these children, Peneus was woven into the genealogies of the greatest heroes of Thessaly, the land that produced Achilles, the greatest warrior of the Trojan War, and the Argonauts who sailed with Jason on the quest for the Golden Fleece. The river god's blood ran in the veins of the men who shaped the age of heroes.

In later ages, the river Peneus retained its sacred character. The Greeks believed that river gods had the power of prophecy, and suppliants would cast offerings into the waters to receive omens. The Roman poet Virgil, writing in the first century BCE, described the river as a place of pastoral beauty, where shepherds led their flocks to drink and where the gods might walk unseen. The Vale of Tempe remained a place of pilgrimage, and travellers would ride through it to see the spot where Daphne had been transformed. In the modern age, the river still flows through Thessaly, though its course has shifted and its name has become the Pinios. The mountains still rise on either side, and the reeds still grow on its banks, a reminder that some gods outlast the temples that were built to them.