Brown sausage in a large skillet over medium-high, crumbling it. Remove and set aside, leaving 1 tablespoon drippings in pan.
Sauté peppers and onion in skillet about 6-8 minutes until softened; cool vegetables and sausage completely.
Spray a 9x13-inch dish with cooking spray; spread cooled sausage and peppers evenly inside.
Whisk eggs, milk, Italian seasoning, salt, and pepper in a large bowl; stir in cheddar.
Pour over sausage and vegetables; cover with foil and refrigerate overnight.
Next morning, preheat oven to 350°F; stand casserole at room temperature while oven heats. Bake covered 30 minutes; uncover and bake another 15 minutes until set and lightly golden.