The afternoon of 10 August 1976 in the Provisional IRA heartland of Andersonstown in west Belfast was hot and sunny. But, as ever, the ongoing conflict was being played out, this time with a British army patrol pursuing a suspect speeding car through streets busy with people shopping and walking.

At about 2pm, when the chase reached Finaghy Road North, soldiers opened fire on the speeding car, killing “Volunteer” Danny Lennon, the 23-year-old driver. His car immediately went out of control and veered on to the pavement outside a church. Before it careered to a halt against the railings, it had run down three children and their mother, Anne Maguire. Eight-year-old Joanne and her six-week-old brother, Andrew, died immediately while another brother, two-year-old John, died from his injuries the next day. Anne, after days in a coma, survived, but killed herself eight years later. Another son, Mark, aged seven, who was on his bicycle ahead of the family group escaped injury. A second person in the car fled the scene.

A local woman who worked as an office receptionist, Betty Williams, heard the gunfire and was among the first at the scene. Horrified, in the immediate aftermath she began a petition, knocking on doors and calling for peace in Northern Ireland, and quickly gained 6,000 signatures.

“There had been other tragic deaths,” Williams, who has died aged 76, said at the time, “but the tragedy of the little Maguires was the moment when I felt we just could not take any more.”

At the tearful triple funeral Williams sought out Mairead Corrigan, an aunt of the children, to commiserate. It was a conversation that was to have life-changing consequences for both.

A hitherto confidential memorandum, written in the Northern Ireland Office at Stormont on the day of the crash, described the incident as a “carefully planned operation” and “a major success” for the army, while plans were laid to exploit the tragedy to drive a propaganda backlash against the Provos.

However, the NIO quickly lost control of the situation as an unprecedented wave of loathing cascaded from both sides of the religious divide in Belfast, right across Ireland and further afield.

Much of it was led by women grieving for the victims and demanding an end to the Troubles, which were then in their ninth year. Williams and Corrigan themselves led a march of 10,000 Catholics and Protestants through Andersonstown. The scene of the deaths had become a flowered grotto, while spontaneous prayer marches throughout Ireland were taking place every night.

It was while being interviewed at a television studio about the protests that Williams and Corrigan met Ciaran McKeown, a local journalist. He offered to help the pair handle the intense media interest that was already engulfing them.

Guided in the background by McKeown, Williams and Corrigan emerged as the figureheads of a new peace movement, which became known as the Peace People after a declaration written by McKeown and read out by the pair at a rally on 21 August.

The movement attracted significant support and funding, and for weeks dominated the headlines. A good news story from Northern Ireland after years of civil disorder and failed political initiatives was universally welcome.

There followed a clamour for Williams and Corrigan to be awarded the Nobel peace prize, an honour bestowed the following year. The pair were the youngest recipients of the prize and the monetary award was worth about £560,000, equivalent to about £3.6m today. The money was equally divided but, while Corrigan donated her share to the Peace People organisation, Williams kept hers, saying she intended to use it to promote peace beyond the boundaries of Ireland. This led to criticism from many that she was using the prize as a ticket to fame and personal fortune. Williams said she needed the money.

Betty Williams (left) and Mairead Corrigan during a rally for peace in Northern Ireland – the pair first met at the funeral for three children killed during the Troubles. Photograph: Bettmann Archive

Relations between the two women soured and they were soon completely ignoring each other. In 1978 Williams severed links to the movement she had co-founded. While Corrigan, a devout Catholic, stuck to her primary concern of bringing an end to the local troubles, Williams, dazzled by the attention she received from journalists and broadcasters, focused on becoming an international peace activist and enjoying the associated lifestyle.

In the years to follow she travelled widely on her own global peace mission, rubbing shoulders with Nelson Mandela, Archbishop Desmond Tutu, Mother Teresa, the Dalai Lama, Yasser Arafat and Aung San Suu Kyi. She was showered with invitations to lecture worldwide and invited to participate in many global peace initiatives. In the process she came to know activist celebrities such as Joan Baez and Sharon Stone and the US presidents Jimmy Carter and Bill Clinton, together with senior figures at the UN. In all she accumulated 20 awards and doctorates and served on the boards of 15 international peace and children’s organisations.

It was all a far cry from her early life in wartime Belfast, the daughter of a Protestant butcher, Jim Smyth, and his Catholic wife, a part-time waitress. Betty, who had a younger sister, Maggie, first attended St Teresa’s primary school and then St Dominic’s grammar. She always said that her mixed upbringing had taught her tolerance.

Aged 18, three years after leaving school, she married Ralph Williams, a marine engineer, with whom she had a son, Paul, and daughter, Deborah. Their marriage was dissolved in 1981 and, a year later she married James T Perkins, a wealthy American businessman, and lived with him in Florida. By the end of her life she was living back in Belfast.

Her children survive her.

• Betty (Elizabeth) Williams, peace campaigner, born 22 May 1943; died 17 March 2020

• This article was amended on 23 March 2020. Though the Nobel prize that Betty Williams and Mairead Corrigan received was called the Nobel peace prize 1976, it was announced and awarded in 1977, so not “within months” but “the following year”. A reference to relations between Williams and Corrigan souring “by the end of 1976” has been deleted.