Target tracking is usually a challenging application for wireless sensor networks (WSNs) because it is always computation-intensive and requires real-time processing. This paper proposes a practical target tracking system based on the auto regressive moving average (ARMA) model in a distributed peer-to-peer (P2P) signal processing framework. In the proposed framework, wireless sensor nodes act as peers that perform target detection, feature extraction, classification and tracking, whereas target localization requires the collaboration between wireless sensor nodes for improving the accuracy and robustness. For carrying out target tracking under the constraints imposed by the limited capabilities of the wireless sensor nodes, some practically feasible algorithms, such as the ARMA model and the 2-D integer lifting wavelet transform, are adopted in single wireless sensor nodes due to their outstanding performance and light computational burden. Furthermore, a progressive multi-view localization algorithm is proposed in distributed P2P signal processing framework considering the tradeoff between the accuracy and energy consumption. Finally, a real world target tracking experiment is illustrated. Results from experimental implementations have demonstrated that the proposed target tracking system based on a distributed P2P signal processing framework can make efficient use of scarce energy and communication resources and achieve target tracking successfully.