A study was conducted with objective of developing pepper cultivars with high yield potential, insect and disease resistance, and superior fruit characteristics, using USDA germplasm. In preliminary greenhouse trials, several F1 generations were created through inter- and intra-specific crosses among 23 germplasm lines belonging to six Capsicum spp. Selected F1 progeny, parent lines, and selected accessions were planted in single-row field plots in summer of 2007. In general, higher crossing success was obtain among intra-specific crosses than among inter-specific crosses. The Genotypic variation was significant for all parameters examined. The average percent germination (83.1%) of F1 progeny was 33% and 46% higher than that of the parent lines and selected accessions, respectively. The F1 progeny were shorter in height, more vigorous in growth, flowered earlier, had fewer, but heavier fruit per plant, and out-yielded the parent lines and accessions by 51% and 79.5%, respectively. The study showed marked heterosis in the F1 progeny compared to the parent lines and accessions.