‘La Vera' smoked paprika is a traditional Spanish product regulated under a protected designation of origin. Mycotoxins are possible contaminants in paprika, yet there is little information about mycotoxin production during the processing of smoked paprika. In this study, samples of dried peppers collected from six traditional dryers from four producers were evaluated for physicochemical parameters, mycotoxins, and mycotoxin-producing fungi. The moisture content and water activity of the peppers ranged from 11.0 to 16.3% and 0.513 to 0.611, respectively, with significant differences among the dryers (P ≤ 0.05). Culture methods revealed fungal counts of 2.6 to 5.7 log CFU/g, with significant differences among the dryers (P ≤ 0.05), and real-time PCR revealed aflatoxin-producing fungi (2.00 to 3.42 log CFU/g) in all dryers. However, mycotoxins were not detected in dried pepper samples. Sixty-seven mold species isolated from dried peppers were identified by sequencing of the ITS1–5.8S rRNA–ITS2 region and characterized by mycotoxigenic ability. Four isolates of Penicillium expansum, four isolates of Penicillium thomii, and one isolate of Aspergillus parasiticus were producers of patulin, penicillic acid, and aflatoxins, respectively. Toxigenic fungi were inoculated onto smoked dried peppers and stored at 84, 91, 94, and 97% relative humidity (RH) at 20°C for 30 days. Patulin was not detected under any of these conditions. Penicillic acid was detected in dried samples stored at 91 to 97% RH, although the optimum condition was isolate dependent. Aflatoxins G2, B1, and B2 were detected at 91 to 97% RH, with the highest concentrations at 94% RH. According to our results, hazard analysis critical control point systems should be used to control the drying and storage conditions of dried peppers until the milling step to avoid rehydration, which encourages fungal growth and mycotoxin production.