Pegnose Pete was an infamous pirate on Lucre Island who lived in a shack in the islands swamp. Pete was named for having a prosthetic nose. He lost his real nose to a duck causing him to have a fear of the birds ever since.
He once had a run in with Freddie, the walking stick maker, but since he had with him a walking stick with a duck shaped handle Pete was frightened off. However Freddie was not convinced about the duck story having said he would have to be still for a long period of time to have his nose completely bitten off by a toothless duck.
He bought his noses from the prostheses store in town. Since the owner was blind he could only tell Pete by his odourous smell. He had an account there under an alias so he could not be discovered, but have his noses replaced when he needed them.
He framed Guybrush Threepwood for robbing the bank in order to take the Marley Heirlooms by impersonating Threepwood in a cheap mask. He had been hired to do so by Ozzie Mandrill. He placed the Heirlooms in his cave, but even when Threepwood captured him he did not give out the location. Mandrill eventually led Threepwood to it inadvertently.
His impenetrable cave which could only be accessed underwater was very curious as it had a parlour he used to view on the treasure he had in it.
Threepwood used his knowledge of Pete's duck phobia to scare him out of his home and into a trap.
After he was captured the fake nose found in the bank eventually proved his guilt and Threepwood was cleared of the crime, but Pegnose Pete escaped using a smoke screen.
After Charles L. Charles won the gubernatorial election on Melee Island he captured Elaine Marley at gunpoint then delivered her to Ozzie Mandrill and LeChuck. However, once Mandrill had completed the Ultimate Insult he wanted to test it. Pete who had not yet been paid for his service theatened to shoot them, but Mandrill used the voodoo weapon to break his confidence. He turned into a quivering wreck saying, "Don't hurt me please anything you say Mr. Mandrill". Mandrill responded by telling him to "Take a long walk off a short pier". Pegnose Pete without the will to refuse was assumed to have done this and so must have drowned.