Global climate change is having a significant effect on agriculture by causing greater precipitation variability and an accelerated risk of drought. To mitigate these effects, it is important to identify specific traits, adaptations, and germplasm that improve tolerance to soil water deficit. Local varieties, known as landraces, are less domesticated than commercial cultivars and can serve as sources of abiotic stress tolerance. Landraces can possess local adaptations, where accessions adapted to a particular environment will outperform others grown under the same conditions. These adaptations may exist in chile pepper landraces from Mexico, a center of domestication and diversity. In the present study, we evaluated 25 landrace and commercial accessions of chile pepper from the U.S. and Mexico under soil water deficit. We carried out a greenhouse experiment in a randomized complete block design using two levels of irrigation (control and water deficit). Morphological traits, including plant biomass, plant height, and number of primary branches were collected at termination of the experiment. Additionally, we evaluated two physiological parameters: stomatal conductance and CO2 assimilation. Significant main effects were found for plant biomass and plant height, as well as a significant interaction between accession and irrigation for primary branching and assimilation. A priori contrasts between landrace and commercial accessions revealed a possible plastic response to water deficit in landraces, with increased primary branch number and assimilation rate. Additionally, we performed a regression analysis on Mexican landraces with environmental parameters associated with their environment of origin that revealed a significant relationship between number of primary branches and precipitation variables. Results of this study indicate that landraces have morphological and physiological phenotypic plasticity in response to water deficit as well as adaptations associated with precipitation. This work provides insight into chile pepper germplasm with tolerance to soil water deficit and lays a foundation for continued study in drought adaptation.