These peppers originated in the Amazonas region and from there spread through Mexico. It was carried north to the Caribbean via Colombia and, on discovery by the Spaniards, was rapidly disseminated to other adequate climate areas of the world, to the point that 18th-century taxonomists mistook China for its place of origin and called it Capsicum chinense.

Like the related Scotch bonnet (with which it is often confused, although it has a different pod type), it has a thin waxy flesh. Unripe habañeros are green, but they change colour as they mature. Common colours are orange and red, but white, brown, yellow and even pink are also seen.