From On Food and Cooking by Harold McGee:

“In the United States, pungent capsicum fruits are generally called ‘peppers,’ or ‘hot peppers,’ terms that stem from the early Spanish identification of capsicum with black-pepper pungency. The native Nahuatl word was ‘chilli,’ which gave rise to Spanish ‘chile,’ and in turn to American ‘chili’ (both a capsicum-flavored stew and the powder used to make it).”