After serving for five years as the minister of the First Church (Unitarian) in Harvard Square, Peabody taught college and theological students Christian ethics at Harvard, specializing in pioneer applications of religion to social problems. Undergraduates described his course as “Peabody’s drainage, drunkenness, and divorce.” His primary book, Jesus Christ and the Social Question, called for social reform rather than a radical reconstruction of society. It emphasized cooperation rather than class conflict. Incidentally, he dared to proclaim, “Jesus Christ came to save men from theologians.”

Peabody served for forty years as a trustee of the Hampton Institute designed to promote the advancement of the American Indian and the American Negro. He was helpful in the founding of the social service and social outreach of college students through the Phillips Brooks House Association.

In order to facilitate his teaching, he introduced the first university department of social ethics and supplemented it by founding the Social Ethics Museum featuring 6,000 photographs relevant to social reform in America’s 1895-1910 period of rapid urbanization, industrialism and immigration. The photos are now part of Harvard's Fogg Museum. The Museum of Modern Art in New York mounted an exhibition of these candid images of Ellis Island, hospitals, housing, and education in various states in the Midwest as well as the North and the South.

Now standing visibly in appreciation of the life of Francis Greenwood Peabody is the Peabody Terrace along the Charles River, a three-tower complex for married students—one of the most notable designs of Josep Lluis Sert.