Commissioners voted 3-0 to terminate the 31-year-old officer, who sat impassively during a nine-minute hearing at the Oak Brook village board room.
Peterson had no comment, but attorney Tamara Cummings said she would appeal the decision to the DuPage County Circuit Court.
"We're disappointed, but not surprised," said Cummings. "This board is a kangaroo court, for lack of a better word."
In a three-page finding, the board ruled that Peterson delivered contradictory testimony, failed to disclose information and demonstrated poor judgement during an Illinois State Police investigation into the disappearance of Stacy Peterson, the fourth wife of his father, Drew Peterson.
Reading from the findings, commission chairman Frederick Cappetta said Stephen Peterson took possession of three weapons from his father to prevent discovery and seizure during a search of Drew Peterson's Bolingbrook home by law enforcement agents.
Cappetta said Stephen Peterson failed to notify police that he had the weapons or tell investigators that Drew Peterson had transferred $236,800 to his son shortly after Stacy Peterson vanished.
"Officer Peterson's continuing claim that the weapons and money were irrelevant to the investigation by the Illinois State Police were self-serving, disingenuous, not credible and demonstrates that Officer Peterson lacks the fundamental ability to make sound judgments," Cappetta said.
In a December hearing, Stephen Peterson told the board he was simply helping his father and that his actions had nothing to do with his duties as an Oak Brook police officer.
Drew Peterson remains in jail as a suspect in the drowning death of his third wife, Kathleen Savio. He is also the sole suspect in the disappearance of Stacy Peterson, although he has not been charged.
Stephen Peterson, who joined the Oak Brook department in 2004, will be paid up to his termination date. The board rejected a motion that he be suspended without pay until the outcome of a disciplinary hearing.
The board also rejected the Illinois Fraternal Order of Police Labor Council's motions to dismiss charges and continue the firstname.lastname@example.org