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both are made from dried, ground peppers. The difference is the type of peppers used. Also, Chili Powder can also have other spices mixed into it. Chili Powder can range from sweet to more spicy while paprika is generally more mild. Also, some paprika varieties are smoked.
Basically, they both have distinct flavors and most often cannot be interchanged in recipes. even the different types of paprika are distinct from one another, as are different types of chili powder. i would experiment with a few to see what I am talking about.
pierino is a trusted source on General Cooking and Tough Love.
added about 1 year agoI've found that the stuff sold as "paprika" in America is basically useless for anything other than adding color to deviled eggs. Sometimes Spanish pimenton is given the misnomer "paprika" even though it's far more serious in flavor. The stuff that's bottled as "chili powder" in the US is usually fairly consistant.
Paprika is a style of pepper powder of which there are four sub types: sweet, hot (picante), smoked and not smoked. Most of what is sold here is sweet Hungarian. If it's fresh, it has a lot of flavor. If it's old, it tastes like red dust. The Spanish Pimentón de la Vera (paprika from the Vera region), is dried over smoke. If the paprika was actually grown in the U.S., it's likely a dark red, very sweet variety.
Chile powders here are either sold by the name of a specific chile (chipotle, cayenne, etc.) or, if the label reads simply "Chili Powder", it's a mixture of ancho and maybe other chiles, cumin, garlic, oregano and other spices. Most of these mixtures are very mild for American tastes.