This study assessed the optimum water need of pepper (Capsicum annuum L. cv. California Wonder) and the critical irrigation level to be applied in order to achieve a reasonable economic yield in water shortage conditions. In a controlled field experiment involving five different treatments, seasonal evapotranspiration for pepper fluctuated from 89 mm in the severe stress treatment (I-0.00) to 1,018 mm in the excess water application (I-1.25). The highest yield was obtained in the full treatment where water in the root zone was refilled up to field capacity. In cases of water shortage, applying water of 690 mm ensures an economical yield. Maximum leaf area index was recorded in the full treatment (I-1.00), which enabled the pepper to receive more benefit from total incoming solar radiation (average, 2,387 MJ m(-2)). An average of 555.45 MJ m(-2) was held by the pepper canopy throughout the whole growing season. Radiation use efficiency values on a dry yield basis were 0.69 g MJ(-1) in 2011 and reached 1.07 g MJ(-1) in 2012, since the leaf area index increased from 1.46 to 2.44. Therefore, averaged over two years, the peppers in the full treatment converted irrigation water of 888 mm and intercepted photosynthetically active radiation into the highest yield of 75.5 t ha(-1), which was more efficient than the excess and deficit water application treatments.