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Penney played in the Canadiens' farm system through the 1983-84 playoffs. In those playoffs, Canadiens' coach Jacques Lemaire decided to go with the young and inexperienced Penney. He surprised everyone by starring in the playoffs, even getting three shutouts.
In 1984-85 he became the Canadiens' number one goalie and was named to the NHL All-Rookie Team. But the next season he was relegated to the backup role. He won a Stanley Cup with the 1986 Canadiens. Due to a season ending injury in January Steve Penney only played 18 games, but was dressed for 30. Penney's name was left off the cup, even though he qualified due to an injury exemptions. Montreal did include Steve Penney on the team picture, and gave him a Stanley Cup ring.
He was traded to the Winnipeg Jets in 1986 but saw very little action. Penney retired in 1988.