Penny Matthews grew up on a farm at Eden Valley. She attended a small local primary school then went to Presbyterian Girls' College (now Seymour College) in Adelaide where she won the Tennyson Medal for English in 1961. After a year's break from study Matthews enrolled in an Arts course at the University of Adelaide, graduating with a first class Honours Degree in English Language and Literature in 1967. She obtained an Master of Arts degree in 1970 and her thesis on the novels of Thomas Hardy was published as Novels of Thomas Hardy: Illusion and Reality (1974) by Athlone Press of the University of London.
She lived and worked in London for three years before returning to Adelaide and taking up a position as book editor with Rigby Limited. She worked with Rigby for eight years and then freelanced for several years, before being invited in 1987 to work part-time for Omnibus Books. She was appointed Senior Editor of Omnibus in 1989.
Reading has always been central to Matthews' life, and she always wanted to be a writer. She submitted her first manuscript for publication when she was fourteen, but did not break into the world of children's publishing for another thirty years, when her first picture book, Annie and Me, was published in the Macmillan reading series, 'Connections', in 1992. Although she has lived in Adelaide for nearly all of her adult life her rural childhood has remained vivid for her, and farm life has featured in many of her books. Matthews is also the author of Australian Colonial Cookery (1977 and rev. ed. 1982) published under her maiden name, Penelope Vigar. In addition she compiled numerous collections of short stories for Omnibus/Puffin in the 1980s and 1990s.