Cut Peter out, bring Charlie in (4)
I believe the answer is:
dice
'cut' is the definition.
(dicing is a kind of cutting)
'peter out bring charlie in' is the wordplay.
'peter out' becomes 'die'.
'bring charlie' becomes 'c' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'in' is an insertion indicator.
'die' placed around 'c' is 'DICE'.
(Other definitions for dice that I've seen before include "Take a risk" , "Cut into small cubes" , "Gambling items" , "Gamble; cut into cubes" , "Random number generators" .)