Arrange a rack in the center of the oven and heat the oven to 350°F.
Coat a 2-quart casserole dish with cooking spray.
Bring a large pot of salted water to a boil.
Add 12 ounces dried egg noodles and cook according to the package directions.
Drain and set aside.
Meanwhile, chop 1 green bell pepper.
Chop ½ medium yellow onion.
Heat 2 tablespoons olive oil in a large skillet over medium heat.
Add 1 pound Italian sausage and cook, breaking the meat up into pieces, until the pink starts to disappear, 3 to 4 minutes.
Add the chopped bell pepper, the onion, ¾ teaspoon kosher salt, and ½ teaspoon pepper.
Stir and cook until the vegetables begin to soften, about 8 minutes.
While the sausage mixture cooks, shred the cheese.
Shred 8 ounces cheddar cheese (about 2 cups) on the large holes of a box grater.
Add 1 can tomato sauce and ¼ cup water to the sausage mixture and stir to combine.
Cook until bubbly and heated through, about 2 minutes.
Remove from heat and stir in the cooked noodles and 1 cup of the shredded cheddar cheese.
Stir to coat the noodles.
Taste and season with more salt if needed.
Transfer to the prepared casserole dish.
Sprinkle the top with the remaining 1 cup shredded cheddar cheese.
Bake, uncovered, until hot and bubbly on the edges, about 25 minutes.
