Water saving, productivity, and quality of the chile pepper were evaluated under three irrigation treatments. Three drip irrigation treatments used were 1) control, where water was applied at the surface using two drip emitters; 2) partial root-zone drying vertically (PRDv), where subsurface irrigation was applied at 20 cm depth from soil surface; and 3) partial root-zone drying compartment (PRDc), where roots were divided into two compartments and irrigation was applied to one of the compartments on every alternate-day cycle for 15 days. Continuous measurements of soil water content were carried out during the growing seasons of 2013 and 2014, respectively. During both growing seasons, the stomatal conductance (g S) and net photosynthetic rates (Pn) were similar among all treatments including the control. In both PRD treatments, a higher rooting depth and root length density (RLD) than the control likely compensated for the water stress in dry soil zones by taking up more water from the water available parts of the root-soil system. In PRDc and PRDv treatments, 30% less water was applied than control without significant changes to plant stress expressed by stem water potential, plant height, capsaicinoid concentration, and yield. The increased irrigation water use efficiency (IWUE) demonstrated water saving potential of both PRD techniques for chile pepper production in water-limited arid environments.