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In the 1970s, the City decided to redevelop the under-used sanitarium property as North Park Village, a campus for City programs and social services. The redevelopment plan called for transforming the original hospital and grounds into senior citizen housing, a school for the developmentally disabled, and a wooded, 46-acre nature preserve. In addition, nearly 23 acres were developed as parkland. Thereafter, the �첥��Ƶ began leasing the site from the City and still does today, and soon improved it with playgrounds, basketball and volleyball courts, and athletic fields. An existing building provided space for indoor recreation. Improvements made in the 1990s included the addition of two soft surface playgrounds and the creation of a gymnastics center in another of the old sanitarium buildings.

On October 10, 1978, the Park District Board of Commissioners approved an ordinance naming this park, “Peher S. Peterson Park”.  Peterson Park honors Pehr Samuel Peterson (1830-1903), a pioneer nurseryman and early inhabitant of the Swedish community known as Peterson Woods, in what is now the North Park neighborhood. Arriving in the United States in 1850, Peterson came west to Chicago four years later and started a landscape nursery northwest of the City, eventually acquiring over 500 acres of land. Peterson developed an innovative technique for transplanting large trees from his nursery. Peterson's trees soon shaded many Chicago parks and boulevards, including Jackson Park, which was made lush and green for the 1893 World's Columbian Exposition. Peterson also was active in Swedish-American civic and religious groups. The King of Sweden knighted him for his accomplishments. Several years after Peterson's death in 1903, his family donated 160 acres of land to the City of Chicago for a municipal tuberculosis sanitarium. When the sanitarium opened in 1915, TB was the Western World's leading killer, but by mid-century, improved public hygiene and the advent of vaccines and antimicrobial drugs had drastically reduced the incidence of the disease.