Neil, 68, filed the divorce petition in July and a hearing is set for the end of this year, reported Rolling Stone.
Pegi, 61, who herself is a singer, is said to have inspired many of Neil's songs including 'Such A Woman', 'Unknown Legend' and 'Once An Angel'.
Their meeting in a California dinner was apparently immortalised by Neil in 'Unknown Legend' in which he sings 'I used to order just to watch her float across the floor'. She has also acted as his backing singer on numerous occasions, beginning in the early 1990s.
The couple has son Ben, who is diagnosed with cerebral palsy and daughter Amber Jean, who like Neil suffers from epilepsy.
The two also formed a charitable organisation, The Bridge School, to help children with severe physical impairments. They have worked together to raise money for The Bridge School and performed last October at a charity benefit.
They were supposed to be appearing together at another charity event, Farm Aid in North Carolina in September but Pegi's name has recently disappeared from the line-up.