Capsicum is a common spice used in food flavouring. However, they are prone to mycotoxin contamination. Mycotoxins are natural toxins produced by filamentous fungi and can pose serious risks to human health. Fungal contamination was assessed in 130 randomly collected samples following ISO 21527–2:2008 standards. Results revealed that 84.6% of the samples exceeded the acceptable fungal count limit (102 CFU/g) according to Gulf Cooperation Council (GCC) standards (GSO1016:2015). The predominant fungal isolates were Aspergillus (51.1%), notably Aspergillus flavus (38.8%) and Aspergillus niger (37.7%). Molecular characterization focused on crucial genes associated with aflatoxin (AF) and ochratoxin (OT) biosynthesis, 14.4% of the isolates exhibited all targeted AF genes. The mycotoxin analysis, conducted on 34.6% of samples via liquid chromatography-mass spectrometry (LC-MS), detected AFB1 in 28.8% (0.2–13.8 μg/kg) and OTA in 35.5% (6.87–59.00 μg/kg) of the tested samples. This study demonstrates the need of implementing rules governing the methods of storing, shipping, and packing spices in Saudi Arabia, which may help to minimizes the prevalence of toxigenic fungus and mycotoxins. This was the first study in KSA that focused on Aspergillus in Capsicum products.