An important factor in the success of America's national research system is that federal funds for university-based research are awarded primarily through peer review, which uses panels of scientific experts, or "peers," to evaluate the quality of grant proposals. In this competitive process, proposals compete for resources based on their scientific and societal merits. Peer review offers several important benefits to federal agencies, researchers, and the nation. The peer review process: (1) Helps ensure that federal agencies support the best, leading-edge science; (2) Helps agencies develop research priorities by revealing research trends and opportunities; (3) Provides peer feedback to scientists to help them improve their projects; and (4) Ensures public accountability by assuring that tax dollars are spent wisely. Topics discussed herein include harnessing the best technical expertise and consideration of societal needs, exceptions to peer review, and how circumventing peer review undermines our scientific capacity.