When the peppers get there third set of leaves they are ready for transplanting to 4 inch pots. I use either commercially available 4 inch pots (see Garden Planning page for sources) or rinsed half gallon cardboard milk containers cut in two (with holes poked in the bottom of course). Use only high quality potting soil. Never use garden dirt – the plants aren’t ready for that.
I also fertilize the peppers for the first time after transplanting them. For this I use Miracle Grow vegetable food at 1/4 tablespoon to a quart of water, but any good water soluble fertilizer will do.