The Ambassador car used to be one of India's most prestigious vehicles beloved by government ministers. But it has been out of production since 2014.
It is not clear whether Peugeot will revive the brand.
Based on the British Morris Oxford, the Ambassador was for three decades India's bestselling car.
Peugeot has long been keen to get a foothold in India and was one of the first foreign car makers to enter the country in the mid-1990s when the economy first was liberalised.
The Ambassador was from the 1960s to the mid-1980s a status symbol in India and was the only mass produced luxury car on the market.
Although not renowned for its good looks, the car did win plaudits for its spacious interior and sound suspension, which was ideally suited to Indian roads. It was also one of the first diesel cars to appear in India and one of the first to have air conditioning.
But its downfall was as spectacular as its rise - dropping from sales of more than 20,000 cars in the mid-1980s to about 2,000 in 2013-14 when production was suspended.