Fill several small peat pots nearly to the top with a good quality commercial potting mixture. Firm the potting mixture evenly with your fingers, then mist the mixture with a spray bottle. Although physalis seeds can be planted in any container with a drainage hole, peat pots are effective for physalis, as the seedlings don't like to be transplanted. Peat pots are transplanted directly in the soil, where the pot eventually decomposes.
Sprinkle two or three physalis seeds in each peat pot. Cover the seeds with no more than 1/8 inch of potting mixture. Place the pots on a tray and cover them securely with clear plastic wrap.
Physalis seeds need bright light and even temperatures in order to germinate. The pots should never be placed on a windowsill, as windowsills tend to be too hot during the day and too cold at night. Instead, place the pots under at least two florescent bulbs. Leave the lights on for a minimum of 12 hours every day and keep the room temperature at about 70 degrees Fahrenheit. Adjust the lights as necessary to maintain the pots 4 to 6 inches under the lights. Remove the plastic after the seeds germinate in two to three weeks.
Thin the physalis seedlings when each seedling has at least two sets of true leaves, which are the leaves that emerge after the first tiny, seedling leaves. To thin the seedlings, use a pair of manicure or embroidery scissors to cut the weakest seedlings off at ground level, leaving the strongest seedling intact. Transplant the physalis in your garden after you're sure all danger of frost has passed. Allow 2 to 3 feet between seedling.
Keep the soil lightly moist for two or three weeks after transplanting your physalis seedlings. After that time, water deeply at the base of the plant, then don't water again until the top of soil feels slightly dry. Don't allow the soil to become completely dry. Physalis requires no fertilizer, and excessively rich soil can create lush, green foliage and very few blooms. Pinch back the young shoots to promote bushy, full growth.