Let's say I have three environments - Development, Test and Production. I believe I have two options on how to set them up in AWS:
Which one of these approaches is considered best practice? What are the advantages or disadvantages of each, if any? I'm new to AWS and so far have been unable to find a definitive answer for which is best
The good practice is to have production fully separated from test or development environments, which is best achieved by having separate accounts for them:
Accounts in the SDLC OU host non-production workloads and therefore should not have production dependencies from other accounts.
Since you are not using different account, the closest you can get (if you want to follow the good practice) is to have different VPCs (option 1). What's more, to further separate the environments, the VPCs could be in different regions.
Also I would encourage you to re-think why do you need any common resources (i.e. forth VPC). If you share something (e.g. RDS) between prod and devel through the forth VPC, it is a disaster waiting to happen.