Everyone has their own way of going about this, here’s the method we use and it works well for us.
Select Ideal Chilli Pods

First of all, only use fully matured, healthy pods of a good size and ideal shape/pheno. If it’s a red chilli, dont pick it as soon as it looks red, let it ripen through to a deep red. Ultimately, chilli seeds are most viable from fully matured, healthy pods.
Only choose pods from disease free chilli plants. If bugs have beaten you to the pod or if there’s even a hint of mould, don’t waste your time.
Extracting the Chilli Seeds
Before anything else, put on some gloves!
(pro tip: Nitrile gloves are best..!)
If you’re going to be a hero and pass on the gloves, always wash your hands well before next visiting the toilet, rubbing your eye, or picking your nose..

With a small sharp knife and chopping board, cut off the calyx (stem bit connecting to the top of the pod). Then slice the entire chilli in half down the length of the chilli.
Use the knife to gently scrape all of the seeds out of the pod onto paper towel. Throw any seeds that are discoloured (eg: brown) or are much smaller/thinner than others.
Drying the Seeds

Have the seeds sitting separately on the paper towel, they will dry faster with better air circulation as a result.
Put the paper towel on a plate or book or similar, and sit it somewhere which gets some air circulation. Avoid windy spots or you can probably kiss the seeds goodbye.
After 5+ days the seeds will be completely dried out.
Use a completely dry knife to pick off the seeds from the paper towel. Finally the seeds are ready for storage.
Storing Chilli Seeds

Place the seeds into an air tight resealable zip lock bag. Label it with the variety name (get a Sharpie pen, because they don’t fade) and store in a dark, dry place.
Personally we store seed bags in a tea chest (categorised by heat & colours), kept in a drawer.
If stored well, chilli seeds remain viable for years.
Happy growing 🙂
Don’t have the patience, and want to grow new chilli varieties?
You can purchase quality chilli seeds from our Online Chilli Seed Store for delivery in Australia, and support WACSE.