Sainz beat Peterhansel by four minutes and six seconds in the 313km stage, split into two sections with a 238km neutralised stint to the shores of Lake Titicaca and the Bolivian Altiplano.
The first 118km section of the stage ended at an altitude of 4,722 metres.
Toyota's Dutch driver Bernhard Ten Brinke was third but falling further back and more than an hour and 20 minutes behind.
Peterhansel has won more Dakars than anyone and is now chasing his 14th title in a gruelling event that ends in Argentina on Jan. 20.
The car category now looks sure to be won by one of the Peugeot drivers in what is also the manufacturer's farewell to the event.
However, nothing can be taken for granted in the treacherous and tricky conditions.
In the motorcycle standings, Argentina's Kevin Benavides took over the lead from Yamaha's French rider Adrien van Beveren.
The Honda rider ended the stage a minute and 57 seconds clear of his Yamaha rival.
Friday is a rest stage in La Paz.
(Reporting by Alan Baldwin, editing by Ed Osmond)
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