Penzias, who was born in Munich, Germany, earned his BS at City College, New York, in 1954 after fleeing with his parents as a refugee from the Nazis. He gained his PhD from Columbia University in 1962. In 1961 he joined Bell Laboratories at Holmdel, New Jersey, and was made director of their radio research laboratory in 1976. From 1979 he has been executive director of research in the communications division.

Penzias and his coworker Robert W. Wilson (1936– ) are credited with one of the most important discoveries of modern astrophysics, the cosmic microwave background radiation. This is considered to be the remnant radiation produced in the ‘big bang’ in which the universe was created some billions of years ago. As the universe has expanded, the radiation has lost energy: it has effectively ‘cooled’. Its existence was originally predicted by George Gamow and Ralph Alpher in 1948, who calculated that the radiation should now be characteristic of a perfectly emitting body (a black body) at a temperature of about 5 kelvin (–268°C). This radiation should lie in the microwave region of the spectrum. Similar calculations were later made by Robert Dicke and P. J. E. Peebles.

The discovery of the remnant radiation was made while Penzias and Wilson were working at the Bell Laboratories. They were using a 20-foot (6-m) directional radio antenna, designed for communication with satellites, and found what appeared to be excessive radio noise in their instrument. They decided to investigate further, thinking that it could be due to radio waves from our own Galaxy. In May 1964 they found that there was a background of microwave radiation that came from all directions uniformly and was not accountable simply as instrumental noise. They calculated its effective temperature as about 3.5 kelvin. An explanation was proposed by Dicke at nearby Princeton University that this was the predicted remnant radiation of the creation of the universe. Subsequent experiments confirmed that it was isotropic and apparently unchanging (on human timescales).

For their discovery Penzias and Wilson were awarded the 1978 Nobel Prize for physics, which they jointly shared with Pyotr L. Kapitza, who received the award for his (unrelated) developments in low-temperature physics. Penzias and Wilson have continued to collaborate on research into intergalactic hydrogen, galactic radiation, and interstellar abundances of the isotopes. In particular their work has led to the discovery of a large number of interstellar molecules and rare isotopic species.