Preheat oven to 375 degrees. Pour 1 cup of water onto the bottom of a 9x13 inch baking dish.
Brown the sausage in a medium sized pan over medium-high heat. Salt and pepper to taste. Drain grease from meat if necessary.
In a medium bowl, mix together the cooked sausage with the pesto and 1 Cup of the shredded cheese. Spoon the filling into each bell pepper.
Place bell peppers cut side up in prepared baking dish and cover the dish tightly with foil. Bake in preheated oven for 45 minutes, until peppers are tender.
Remove pan from oven and top peppers with remaining 1/2 cup of cheese. Bake 5 more minutes, until cheese is melted.