Heat oven to 375°F. In large bowl, combine all meatball ingredients; blend well. Shape into 1-inch meatballs; place in ungreased 15x10x1-inch baking pan.
Bake for 25 to 30 minutes or until browned and thoroughly cooked.
Meanwhile, in large saucepan, combine chili sauce and grape jelly; mix well. Bring to a boil over medium heat. Add cooked meatballs and bell peppers. Reduce heat to low; simmer 5 minutes, stirring occasionally. Serve warm.