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The misleading name "pepper" was given by Christopher Columbus upon bringing the plant back to Europe. At that time peppercorns, the fruit of an unrelated plant originating from India, Piper nigrum, was a highly prized condiment; the name "pepper" was at that time applied in Europe to all known spices with a hot and pungent taste and so naturally extended to the newly discovered Capsicum genus. The most commonly used alternative name of the plant family, "chile", is of Mexican origin, from the Nahuatl word chilli or xilli. Bell peppers are botanically fruits, but are generally considered in culinary contexts to be vegetables.

While the bell pepper is a member of the Capsicum genus, it is the only Capsicum that does not produce capsaicin, a lipophilic chemical that can cause a strong burning sensation when it comes in contact with mucous membranes. (An exception to this is the hybrid variety Mexibelle, which does contain a moderate level of capsaicin, and is therefore, somewhat hot). The lack of capsaicin in bell peppers is due to a recessive form of a gene that eliminates capsaicin and, consequently, the "hot" taste usually associated with the rest of the Capsicum genus.

The terms "bell pepper", "pepper" or in Australia and New Zealand "capsicum", are often used for any of the large bell shaped fruits, regardless of their color. In British English, the fruit is simply referred to as a "pepper", or additionally by color (as in the term "green pepper", for example), whereas in many Commonwealth of Nations countries, such as India, Canada, and Malaysia, they are called "bell peppers". In some countries in Europe, the term "paprika", which has its roots in the word for pepper, is used sometimes referred to by their color (e.g., "groene paprika", "gele paprika", in Dutch, which are green and yellow, respectively).