There are several different ways to dry peppers, my preference is to air dry them. It saves energy and requires minimal effort AND is the only method that leaves the peppers and seeds intact.
If you want to dry peppers in the air, leave the peppers whole, and leave the stems attached. Using a long, sharp needle and strong thread or fishing line, string the peppers together. Leave enough room for the air to circulate between each pepper. Hang your stringed peppers in a warm, dry place, preferably in direct sunlight. Peppers may take a few weeks to dry completely.
Peppers dried in the dehydrator or oven will lose some of their color and the seeds will fall, while air-dried peppers will retain both their color and their very spicy seeds. When peppers are completely dried, store them in an airtight container or zippered plastic bag in a cool, dry place. Dried peppers can be ground and used as spices, or you can soak them in water to rehydrate them, and use them in soups and sauces.
Other methods of drying:
Drying Peppers with a Dehydrator
If you want to know how to dry hot peppers with a dehydrator, first, slice your peppers in half. If desired, remove the seeds, stem, and membranes from each pepper half. Lay the halves, cut side down, in single layers on the dehydrator screens. Take your dehydrator to a well-ventilated area. The fumes from very hot peppers will make your eyes water, and since this process can take several days, you'll want to make sure that the location is closed off and well ventilated. Outdoors would be even better, if possible. Let the peppers sit in the dehydrator for several days at about 100 degrees Fahrenheit, checking to see how they're progressing. The peppers must be very dry before they're done, as any moisture left over will invite mold and parasites.
Drying Peppers in the Oven
Prepare your peppers the same way as you would when using a dehydrator. So remember, if you use this method, you will remove the hot pepper seeds as well. You can arrange them directly on your oven racks if desired, or use baking sheets. Put the peppers in the oven and heat to 100 to 135 degrees Fahrenheit. Leave the oven door open a bit to provide air circulation. If you're using baking sheets, turn the peppers frequently to provide even drying. Allow the peppers to dry well, with no discernible moisture left over.