Peridot is one of the few gemstones that occur in only one color: an olive-green. The intensity and tint of the green, however, depends on the percentage of iron in the crystal structure, so the color of individual peridot gems can vary from yellow, to olive, to brownish-green. In rare cases, peridot may have a medium-dark toned, pure green with no secondary yellow hue or brown mask. Lighter colored gems are due to lower iron concentrations.

The molecular structure of peridot consists of isomorphic olivine, silicate, magnesium and iron in an orthorhombic crystal system. In an alternative view, the atomic structure can be described as a hexagonal, close-packed array of oxygen ions with half of the octahedral sites occupied with magnesium or iron ions and one-eighth of the tetrahedral sites occupied by silicon ions.

Olivine, of which peridot is a type, is a common mineral in mafic and ultramafic rocks, often found in lava and in peridotite xenoliths of the mantle, which lava carries to the surface; however, gem-quality peridot occurs in only a fraction of these settings. Peridots can also be found in meteorites.

Peridots can be differentiated by size and composition. A peridot formed as a result of volcanic activity tends to contain higher concentrations of lithium, nickel and zinc than those found in meteorites.

Olivine is an abundant mineral, but gem-quality peridot is rather rare due to its chemical instability on Earth's surface. Olivine is usually found as small grains and tends to exist in a heavily weathered state, unsuitable for decorative use. Large crystals of forsterite, the variety most often used to cut peridot gems, are rare; as a result peridot is considered to be precious.

In the ancient world, mining of peridot, called topazios then, on St. John's Island in the Red Sea began about 300 B.C.

Peridot has been prized since the earliest civilizations for its claimed protective powers to drive away fears and nightmares, according to superstitions. It is believed by some people to carry the gift of "inner radiance", sharpening the mind and opening it to new levels of awareness and growth, helping one to recognize and realize one’s destiny and spiritual purpose. There is no scientific evidence for such claims.

Peridot is sometimes mistaken for emeralds and other green gems. Notable gemologist George Frederick Kunz discussed the confusion between emeralds and peridot in many church treasures, notably the "Three Magi" treasure in the Dom of Cologne, Germany.

The principal source of peridot olivine today is the San Carlos Apache Indian Reservation in Arizona. It is also mined at another location in Arizona, and in Arkansas, Hawaii, Nevada, and New Mexico at Kilbourne Hole, in the US; and in Australia, Brazil, China, Egypt, Kenya, Mexico, Myanmar (Burma), Norway, Pakistan, Saudi Arabia, South Africa, Sri Lanka, and Tanzania.