Contrary to popular myth, hot pepper plants make good companions for sweet pepper plants and vice versa.
Companion Plants to Avoid: Avoid planting sweet peppers or hot peppers with any plant that adds nitrogen to the soil, such as beans, kohlrabi, fennel, cabbage, and broccoli.
Good Companion Plants for Pepper: Try interplanting peppers with sunflowers, which have similar watering needs (though you can cater to the water needs of the peppers), and mature through the long warm summer. Sunflowers may be able to provide some shade for pepper plants.
Hot pepper plants make good companions for sweet pepper plants and vice versa. Pepper plants are self-pollinating and therefore sweet pepper plants can be grown next to hot pepper plants without affecting the flavor of the pepper fruits on either plant.
However, gardeners who would like to save pepper seeds for next year’s crop should use caution. Seeds can be saved from hot pepper plants or sweet pepper plants that have been isolated from other pepper plants for at least 500 feet. Pepper flowers can be cross pollinated by sweat bees and honey bees; 500 feet should ensure seed purity. “Spiciness” is a dominant gene. Seeds from sweet peppers grown next to hot pepper plants can produce pepper plants with hot peppers.
If you are saving seeds, choose fully mature, disease free fruit. Be careful when removing the seeds and use gloves or other protective coverings! Seeds should be dried out of direct sunlight until completely dry; they should snap when folded in half. Date and place seeds in a marked envelope until ready for planting.
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Other articles of interest:
Sweet Pepper Varieties: Colors, Flavors and Growing Characteristics