In autumn 2006, a new disease was observed in a glasshouse-grown crop of sweet pepper (Capsicum annuum L.) in the Netherlands. Fruit size of the infected plants was reduced up to 50%, and plant growth was also slightly reduced. Here we show that the disease is caused by a previously non-described viroid. The pepper viroid is transmitted by both mechanical inoculation and pepper seeds and, when inoculated experimentally, it infects several solanaceous plant species inducing vein necrosis and reduced fruit and tuber size in tomato and potato, respectively. The viroid RNA genome consists of 348 nucleotides and, with minor modifications, it has the central conserved and the terminal conserved regions characteristic of members of the genus Pospiviroid. Classification of the pepper viroid within the genus Pospiviroid is further supported by the presence and structure of hairpins I and II, the presence of internal and external RY motifs, and phylogenetic analyses. The primary structure of the pepper viroid only showed a maximum of 66% nucleotide sequence identity with other viroids, which is far below the main species demarcation limit of 90%. According to its biological and molecular properties, we propose to assign the pepper viroid to a new species within the genus Pospiviroid, and to name this new species Pepper chat fruit viroid.