Per UWorld; capsaicin found in chili peppers causes excessive activation of TRPV1 (transmembrane channel), which increases intracellular calcium that results in long-lasting dysfunction of nociceptive nerve fibers (defunctionalization). It also causes release and depletion of Substance P, causing at first burning and erythema but over time causes decreased pain sensation.
Substance P (SP) is an undecapeptide present in the CNS and the peripheral nervous system. A compound thought to be involved in the synaptic transmission of pain and other nerve impulses.
Capsaicin induces the release of substance P, one of the principal chemo-mediators of pain impulses from the periphery to the central nervous system (CNS). After repeated application, capsaicin depletes the neuron of substance P and prevents its reaccumulation.