Combine bell pepper, tomatoes, onion, and garlic in a blender; blend until smooth. Transfer mixture to a Dutch oven and cook over medium heat, stirring until mixture starts to brown, 5 to 10 minutes. Add water, lentils, basil, Italian seasoning, salt, and pepper. Bring to a boil, cover, reduce heat to low, and simmer until lentils are soft, 25 to 30 minutes.
Meanwhile, heat olive oil in a skillet. Add mushrooms and season with salt and pepper. Cook until tender, stirring occasionally, 4 to 5 minutes. Add cooked mushrooms to lentil soup and simmer an additional 2 to 3 minutes.
