This is a common question and has fueled many arguments over this subject and other similar ones.  Is there a difference? There are many acceptable variations.  Webster’s Dictionary helps to complicate the matter. It provides three spellings–chili, chile and chilli–that are all defined as either hot peppers or a dish of meat and spices.

Chile with an “e” at the end is the correct spelling in Spanish. The word chile originated from the Aztec word “chil,” meaning pepper. Bosland said the Spanish added an “e” to the end of the word to make it a noun in their language.

Chili with an “i” at the end is the Americanized version. The “i” version began with the name of the dish “Carne con Chili,” meaning “Meat with Chile.” It evolved into “Chili con Carne” and then shortened to just “Chili.” The term ending with an “i” is widely accepted and is often used as the name for “Chili Powder.” The term “Chile” with an “e” is the more correct way to spell it, although many forms are accepted.

In the U.S., except for New Mexico, Chili with an “i” is the most common form.  However, New Mexico the most common form is Chile with an “e”.  General practices are that the Chile is used to refer to the pepper itself while Chili is more often used to refer to a prepared dish.  But, there are always personal preferences and all uses are probably okay to use.  Just be prepared for some backlash.
Some accepted spellings are

• Chile
• Chilli
• Chilie
• Chillie