In a wok or large skillet, heat vegetable oil.
Add onion and cook, stirring frequently, until onion has softened and begins to turn translucent.
Add bell peppers and carrots. Cook until just beginning to soften, approximately 3 minutes.
Add curry paste and cook while stirring for 1 minute.
Add chicken, coconut milk, and water. Stir to combine.
Bring mixture to simmer and reduce heat to maintain a gentle simmer. Cook until vegetables are tender and chicken is warmed through.
Remove from heat and add sugar and lime juice. Adjust seasoning as needed.
Garnish with fresh Thai basil, if desired.
