He failed in an attempt to make a living distilling whiskey, but began to write Hebrew language poetry, songs, and tales, some of them written with his father-in-law ; this collaboration, however, did not prevent his divorce in 1878, after which he promptly remarried (his second wife was Helene Ringelblum). At about the same time, he passed the examination to become a lawyer, a profession which he successfully pursued for the next decade, until in 1889 his license was revoked by the Imperial Russian authorities, on the basis of suspicion of Polish nationalist feelings. From then on he lived in Warsaw, where his income came largely from a job in the small bureaucracy of the city's Jewish community. There he founded Hazomir (The Nightingale), which became the cultural centre of pre-World War I Yiddish Warsaw.

His first Yiddish work appeared in 1888, notably the long ballad Monish, which appeared that year in the landmark anthology Folksbibliotek ("People's Library"), edited by Sholom Aleichem. This ballad tells the story of an ascetic young man, Monish, who unsuccessfully resists the temptress Lilith. A writer of social criticism, sympathetic to the labor movement, he wrote stories, folk tales and plays. Sol Liptzin characterizes him as both a realist and a romanticist, who "delved into irrational layers of the soul"... ; "an optimist who believed in the inevitability of progress through enlightenment", and who, at times, expressed this optimism through "visions of Messianic possibilities". Still, while most Jewish intellectuals were unrestrained in their support of the Russian Revolution of 1905, Peretz's view was more reserved, focusing more on the pogroms that took place within the Revolution, and concerned that the Revolution's universalist ideals would leave little space for Jewish non-conformism.

Much as Jacob Gordin influenced Yiddish theater in New York City in a more serious direction, so did Peretz in Eastern Europe. Israil Bercovici sees Peretz's works for the stage as a synthesis of Gordin and of the more traditional and melodramatic Abraham Goldfaden, an opinion which Peretz himself apparently would not have rejected: "The critics", he wrote, "the worst of them thought that M.M. Seforim was my model. This is not true. My teacher was Abraham Goldfaden." Some of Peretz's most important works are Oyb Nit Nokh Hekher ("If not Higher") and the short story "Bontshe Shvayg" ("Bontsche the Silent"). "Bontsche" is the story of an extremely meek and modest man, downtrodden on earth but exalted in heaven for his modesty, who, offered any heavenly reward, chooses one as modest as the way he had lived. While the story can be read as praise of this meekness, there is also an ambiguity in the ending, which can be read as showing contempt for someone who cannot even imagine receiving more. Peretz's 1907 play A Night in the Old Marketplace has been adapted into a multimedia theatrical presentation, with music by Frank London and book and lyrics by Glen Berger, slated to open in 2007; the CD is already on sale. Set in a Jewish shtetl, the comedy presents the philosophical and theological questions of living and dying, in Peretz's typical style.

Peretz died in the city of Warsaw Congress Poland, in 1915. He was buried at the Okopowa Street Jewish Cemetery, a huge crowd attending the burial ceremony.