System.get_env/3 gets from the system environment, while Application.get_env/3 gets from the applications environment.

The first is defined by the means of your operating system, while the later is mostly configured during build using the file(s) in config and local to your application.

The application environment is described in the docs: Application — Elixir v1.20.2

The system-environment is not, since it is not any part of elixir or the BEAM. It’s just there…

Replies above explain the difference between Application.get_env and System.get_env.

As for best practices, have a look at this: Configuration Demystified | Blog · Elixir School

My rule of thumb is to only use System.get_env during application initialization, eg in your Application.start, Repo.init, Endpoint.init callbacks.

Once the application is initialized, the environment should always be queried by Application.get_env, since System.get_env can only return strings.

I like the dev / test environment to be statically defined in the config.exs files, only reading from the system environment for prod builds.