As an important medicinal plant used in traditional and modern medicine, chili peppers are sensitive or moderately sensitive to drought or salt stress, respectively. Therefore, potential changes due to foliar-applied glutathione (GSH; 0, 0.4 and 0.8 mM) response on growth, yield, and physio-biochemical attributes, as well as water use efficiency (WUE) and fruit alkaloid capsaicin of chili pepper plants were investigated when grown under deficit irrigation in salt-affected soil (EC = 6.74 dS m–1). Two deficit irrigation water (DiW) regimes (80% and 60% of soil field capacity; FC) were used versus 100% of FC as a control. Both DiW treatments negatively affected growth and yield parameters, SPAD chlorophyll index, nutrient status, K+/Na+ ratio, and plant anatomical features. In contrast, osmoprotectants, ascorbate, glutathione, capsaicin, and phenolic contents, as well as WUE were increased in association with higher Na+ and Cl– contents. However, exogenously-applied GSH caused significant increases in the above-mentioned parameters along with an additional increase in osmoprotectants, antioxidants, and capsaicin contents, and a decrease in Na+ and Cl– levels compared to corresponding controls. The highest WUE, growth, and fruit yield responses were recorded at 0.8 mM GSH applied to plants under DiW at 80% FC + salinity (6.74 dS m–1). Therefore, this study suggested the use of leafy-applied GSH at 0.8 mM for satisfactory growth and yield with the highest WUE of chili pepper plants grown under salt-affected conditions with deficit irrigation.