On December 1, 1983, Penados was appointed as the XVII Metropolitan Archbishop of Guatemala City and prelate of Esquipulas by Pope John Paul II. During his years of service as the Guatemalan Archbishop, Penados changed the conservative approach of the Catholic Church towards the political scene of the nation, which at the time was suffering some of the most difficult years of the Civil War. He had a key role in the peace negotiations by denouncing many human rights abuses during past military regimes and by the Guatemalan Army, and by his support of human rights activism and victims of the Guatemalan Genocide. He was the founder of the "Oficina de Derechos Humanos del Arzobispado de Guatemala" (ODHA / Office of Human Rights of the Archbishopric) in 1990.