Remove fell (tissue-like covering) from lamb; cut meat into 1 1/2-inch cubes. Combine lamb, salt, pepper, and water in a large Dutch oven. Bring to a boil and cover; reduce heat and simmer 20 minutes.
Add remaining ingredients except peas; cover and simmer 1 hour or until potatoes are tender. Add peas, stirring gently; cook until thoroughly heated. Remove bay leaf before serving.