Retail packages are widely used to preserve pepper fruit quality. However, due to the negative impact of conventional plastics on the environment there is an urgent need to replace these packaging materials with recyclable or compostable alternatives. Hereby, we evaluated the effects of compostable modified atmosphere packages with different perforation rates on keeping the quality of red bell pepper fruit during extended shelf life and simulated supply chain conditions. The results indicated that micro‐perforated (µP) compostable packages creating an atmosphere of 15%–18% O2 and 2%–5% CO2, as well as macro‐perforated (MP) compostable packages creating an atmosphere of 20%–21% O2 and 0.1%–0.5% CO2, effectively retained red bell pepper quality by reducing fruit weight loss, shriveling and softening, and by retaining flavor acceptance and visual appearance. On the other hand, nonperforated compostable packages resulted in the creation of anaerobic conditions (O2 < 1% and CO2 > 9%), and harmed produce quality as manifested by enhanced softening, decay, peel damage, and off‐flavors. Overall, µP and MP compostable packages extended pepper fruit shelf life from 1 week to 3 weeks under continuous shelf life conditions, and from 2 weeks to 4 weeks under simulated supply chain and refrigerated storage conditions.