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Place the 1/4 cup olive oil, lime juice, sugar, salt, cumin, garlic, water, smoked paprika, onion powder and chili powder in a gallon sized resealable bag or large bowl.
Whisk until thoroughly combined.
Add the chicken, onions and peppers to the marinade. Chill for at least 1 hour, or up to 8 hours.
Heat 2 teaspoons of olive oil in a large pan over medium heat.
Add the chicken and pepper mixture. Cook for 6-8 minutes, stirring occasionally, until chicken is cooked through and vegetables are tender.
Season with salt to taste if desired.
Sprinkle cilantro over the fajitas, then serve with tortillas and toppings of your choice.