Akabare chili (Capsicum spp.) is a popular spice crop in Nepal famous for hot and aromatic fruits with a wider distribution from the subtropics to the warm temperate regions, spreading in 54 of the 77 districts. The eastern mid hills region of Nepal is supposed to be the center for the diversity of Akabare chili landraces. Besides its wider use in the kitchen, commercial applications of this wonder spice have been started. The production of Akabare chili is increasing with an increasing area of cultivation over the years. However, chili production has been challenged by different biotic and abiotic factors. An analytical study of genetic variability, production challenges, utilization, and marketing opportunities of Akabare chili landraces in Nepal is still lacking. This study aims to provide information on the diversity, distribution, production, market segmentation, and use of Akabare chili in Nepal, and to discuss the potential roles in Nepalese agriculture. The study is largely a desk review complemented by a field study. In 2021, a total of 9,233 MT of Akabare chili was produced, which was 28% higher than in 2020. Approximately 88% of farm-saved seeds out of a total of 443 kg of Akabare chili seeds were used for the 1,481 hectares of land in 2021. Akabare chili contributed 6.42% and 4.99% to the national total chili cultivated area and production, respectively. Per capita consumption was estimated to be 0.47 kg in 2021, which was 34% higher than in 2020. The study has shown the notable genetic variantion in Akabare chili landraces in seven major Akabare chili areas (field study sites). On a nine-point scale, larger variations were found in fruit (4.6 ± 1.8) and leaf traits (3.3 ± 1). Insect pests (14.1%), diseases (13.1%), and lack of variety (11.5%) were considered the main biotic problems in chili cultivation, followed by drought stress (12.3%) and short supply of fertilizers (10.7%) among the 12 issues identified from the field study. Inadequate market information appeared to be an important issue; however, marketing-related problems shared only 1.6% indicating good market demand. In addition, seed sources and market segments were also discussed. The importance of the physiological and biochemical responses of Akabare chili landraces to biotic and abiotic stresses and the role of agronomy in narrowing existing gaps are discussed and some periodic actions are suggested to improve Akabare chili production in Nepal.