Following the arrival of over 1.2 million refugees and asylum seekers since the 2015 European refugee crisis, Germany has faced enormous humanitarian and societal challenges, with direct implications for participatory peace-building efforts at the local community level. A multitude of postmigration stressors and high prevalence of mental health conditions among refugees contribute to the substantial burden of daily conflicts in refugee shelters and communities. Ongoing exposure to a conflict-prone environment, psychological distress and stigmatization among community members can severely impair the quality of life and aggravate existing health-related, socio-economic and integrational challenges. Previous research has demonstrated the feasibility of individual alternative dispute resolution (ADR) and mental health literacy (MHL) interventions in refugee settings. As interpersonal conflict and psychological well-being constitute mutually interdependent phenomena, integrated methodologies combining ADR with MHL may offer unique value to affected vulnerable populations. However, systemic implementation of such mechanisms in refugee shelters has remained largely unexplored. In recognition of this unmet need and as part of the nonprofit organization R3SOLUTE, we have developed a tailored educational curriculum directed at equipping refugees in shelters and their local neighbor citizens with peer mediation-based ADR and MHL skills. In this multidisciplinary bottom-up approach, termed psychosocial peer mediation (PPM), participants learn to effectively manage and prevent conflicts in their own communities. Based on our field experience with implementing PPM in numerous refugee shelters across Germany between 2018 and 2021, we here provide relevant practical insights and discuss best practices, with a focus on addressing existing challenges and opportunities in the field.