Among the most used inputs in the seedling production stage, substrate has a higher cost when compared to fertilizers, trays and fungicides. The use of residues in addition to commercial substrates, reduces production costs and promotes greater sustainability in the agricultural and industrial production process. The objective of this study was to evaluate the tannery sludge added to commercial substrate in Capsicum baccatum pepper seedlings production, as well as to identify better proportions of the substrate composition integrated with tannery sludge for this seedling. Pepper seedlings were evaluated growing in substrates with eight different compositions of tannery sludge (0%, 10%, 20%, 30%, 40%, 50%, 60% and 80%) in commercial substrates. A randomized block design with four replications was used. Plant height, stem diameter, crown diameter, dry matter of shoot and roots were evaluated, and Dickson quality index was obtained. The linear models were predominantly the most significant to explain the developmental response of the seedlings when the tannery sludge was added in the substrate. It was found that alternative substrate can be used in a proportion of 80% of tannery sludge and 20% of commercial substrate and contribute in Capsicum baccatum pepper seedlings production with greater vigor, besides decreasing the cost of these substrates.