Cook and stir beef, onions and pepper in large skillet until meat is brown. Drain off fat, if necessary. Stir in tomatoes,, breaking up with spoon. Add water, mushrooms, salt and sugar, chili powder and spaghetti.
Heat to boiling, lower heat, cover and simmer, stirring occasionally until spaghetti is tender (approx 30 minutes).
Sprinkle with cheese. Cover and heat until cheese is melted