Dr. Peter Taylor joined the staff of General Hospital in late 1969 as a psychiatrist. Nurse Jessie Brewer's husband, Phil, was presumed dead in an airplane crash in South America, and Peter took an interest in the widow. They fell in love and eventually got married. Unbeknownst to them however, Phil was not dead.
In 1970, Phil returned to town and was in a severe car accident. Phil was in the hospital and had his face covered in bandages, but when the bandages came off, Jessie saw and recognized him! Her marriage to Peter was invalid. Jessie then left Peter and went back to Phil. Peter, then, became close to Diana Maynard, whom Phil had dumped for Jessie. What neither Phil nor Peter knew, however, was that Diana was pregnant with Phil's baby.
When Diana confessed her pregnancy to Peter, he asked her to marry him. When Phil found out that Diana was pregnant with his child, he left Jessie and wanted Diana back. Diana, however, told Phil that she was in love with Peter and was going to marry him. Soon after they got married, Phil and Diana's son was born, and she and Peter named him Tracy Taylor. Phil hated the name because he said it was a girl's name. Diana detested Phil, and when Tracy came down with pneumonia while Peter was out of town, she refused to take him to the hospital because she was afraid of running into Phil there because he was a doctor. Going untreated, Tracy died.
Phil became obsessed with Diana; and one evening, he forced his way into her apartment and raped her. Diana, however, kept quiet about the rape, not telling Peter. Then, Diana found out she was pregnant and let Peter believe it was his child, when it was really Phil's. She gave birth to Martha Taylor, and everyone, including Phil and Peter, assumed she was Peter's. When the truth came out, Peter accused and rejected Diana. Phil then moved to Africa.
Phil, however, still longed for Diana, so he sent Nurse Augusta McLeod to town to ensure that Diana and Peter didn't reconcile. Peter and Augusta soon began an affair. Peter and Diana almost divorced, but realized they still loved each other and reconciled. He also pledged that he loved Martha as if she was his own child. Augusta, however, was worried about Peter and Diana reconciling because she was pregnant with his child, so she wrote Phil in Africa and asked him to come help her break them up.
Phil returned, and no one was happy to see him. Phil informed Peter that Augusta was pregnant with his child. Phil threatened to tell Diana about the pregnancy, and Peter knocked Phil down right in front of the nurses' station and threatened to kill him if he didn't stay away from his wife. That night, Phil was found dead and Peter was one of many suspects. In the end, Peter suspected Augusta and confronted her, and was able to get her to confess to murdering Phil. Augusta went to prison, and when the baby was born, it was sent to foster care. Peter confessed his affair to Diana, and she forgave him.
In 1977, Peter and Diana desperately wanted a sibling for their daughter Martha, whom Peter had legally adopted. Heather Grant had been working for them as Martha's nanny and knew this. Heather was pregnant with Jeff Webber's baby, but Jeff wanted her to have an abortion because he was married to Monica at the time. Instead of having an abortion, Heather decided that she would have the baby and sell him to Peter and Diana. She saw it as a good way to make some money she could use to make a new life for herself. Steven Lars Webber was born, and Heather had him sold to Peter and Diana, who didn't know he was really Heather and Jeff's son. Peter and Diana named him Peter Taylor, Jr. Heather, meanwhile, told Jeff that Steven Lars was dead.
Later that year, a hurricane struck Port Charles. Diana's mother was driving with Martha to an emergency shelter when they were in a car wreck. Mrs. Maynard survived, but little Martha died.
At an adoption party for "P.J.," as they called their new son, Heather's mother Alice Grant realized that the child was actually Steven Lars. In 1979, Alice told Peter the truth. He then went to the mental institution where Heather had been confined to confront her. Peter then returned to General Hospital to tell Jeff the truth, but suffered a heart attack and multiple strokes and died, along with the secret.