Plasma activated water (PAW) generated from pinhole plasma jet using gas mixtures of argon (Ar) and 2% oxygen (O2) was evaluated for pesticide degradation and microorganism decontamination (i.e., Escherichia coli and Colletotrichum gloeosporioides) in chili (Capsicum annuum L.). A flow rate of 10 L/min produced the highest concentration of hydrogen peroxide (H2O2) at 369 mg/L. Results showed that PAW treatment for 30 min and 60 min effectively degrades carbendazim and chlorpyrifos by about 57% and 54% in solution, respectively. In chili, carbendazim and chlorpyrifos were also decreased, to a major extent, by 80% and 65% after PAW treatment for 30 min and 60 min, respectively. E. coli populations were reduced by 1.18 Log CFU/mL and 2.8 Log CFU/g with PAW treatment for 60 min in suspension and chili, respectively. Moreover, 100% of inhibition of fungal spore germination was achieved with PAW treatment. Additionally, PAW treatment demonstrated significantly higher efficiency (p < 0.05) in controlling Anthracnose in chili by about 83% compared to other treatments.