chili / chilly are similar-sounding terms with different meanings (referred to as homophones). To better understand the differences, see below for definitions, pronunciation guides, and example sentences using each term. 👇
chili: (noun) ground beef and chili peppers or chili powder often with tomatoes and kidney beans. (noun) very hot and finely tapering pepper of special pungency.
chilly: (adjective) not characterized by emotion; -C.W.Cunningham. (adjective) appreciably or disagreeably cold. (adjective) lacking warmth of feeling.
chili: ch·IH·l·iy
chilly: ch·IH·l·iy
(Examples are Wikipedia snippets under the CC ShareAlike 3.0 license. Definitions drawn from WordNet.)