Born in Lawton Batista, Havana, Cuba in 1924 (although the birth year is uncertain), he was orphaned by age 7 and lived on the streets. When he was twelve, he supported himself by selling vegetables, coaching boxing, playing semi-pro baseball, and becoming a loan shark. His music career began at seventeen when he heard at a baseball game that bandleader Alberto Ruiz was looking for a conga player. Ruiz's brother was on the same baseball team as Peraza. Despite the absence of experience in music, he practiced and won the audition.
He left Cuba for Mexico in 1948 to tend to his sick friend, conga drummer Mongo Santamaría. They arrived in New York City in 1949. After playing in Machito's big band, Peraza was invited by Charlie Parker to participate in a recording session that included Buddy Rich. He recorded with Slim Gaillard in New York in November 1949 in a session that produced "Bongo City". He toured the U.S. with Gaillard's band until they reached San Francisco, where Gaillard owned the nightclub Bop City. After a period in Mexico, where he recorded with Perez Prado and did some soundtracks for the Mexican movie industry, he returned to the U.S. and settled in San Francisco. While on the West Coast, he worked with Dizzy Gillespie, toured extensively with Charles Mingus and Dexter Gordon, and played in California for Mexican farm workers with Puerto Rican actor and musician Tony Martinez (who played "Pepino" on the TV show The Real McCoys). Armando also led an Afro-Cuban dance review at the Cable Car Village club in San Francisco, attracting a clientele from Hollywood that included Errol Flynn, Marlon Brando, and Rita Hayworth.
In 1954, while in San Francisco with pianist Dave Brubeck, Peraza met Cal Tjader, Brubeck's drummer at the time. Jazz critic Leonard Feather recommended Peraza to Fantasy Records to record an Afro-Cuban album with Tjader. The result was Ritmo Caliente, which combined Afro-Cuban rhythms with a jazz sensibility. He was introduced to British pianist George Shearing by bassist Al McKibbon. He spent the next twelve years with Shearing, a collaboration that put Peraza at the front of Afro-Cuban music. He emerged as a composer, writing and recording twenty-one songs for Shearing, such as "Mambo in Chimes", "Mambo in Miami", "Ritmo Africano", "Armando's Hideaway", "This is Africa", and "Estampa Cubana". These recordings were during the mambo craze in the U.S. and the world. Peraza's technique and power as a hand drummer became a feature of Shearing's performances.

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