1. Peanuts grow in the ground.

2. Peanuts grow on the ground.
(Which preposition is correct, 'in' or 'on'? Are both okay?)

"on" means on top of (the ground), on the surface. "in" means just what it says, IN the ground, below the surface.

... so #1 is the correct one.

Both prepositions, "in" and "on," can be used to describe the location of peanuts. However, there is a subtle difference in meaning between the two.

1. "Peanuts grow in the ground" implies that peanuts are planted or develop beneath the surface of the soil. It suggests that the peanuts' entire growth cycle, including the seed germination, root development, and pod formation, occurs beneath the ground.

2. "Peanuts grow on the ground" emphasizes the fact that once the peanuts have matured and are ready for harvest, they are found lying on the surface of the soil. This usage highlights the final stage of the peanut's growth when the pod containing the mature nuts is exposed and visible.

So, depending on the specific context or the aspect of peanut growth you want to emphasize, both "in" and "on" can be used.