According to AWS Cloud Operations and VPC Networking documentation, when VPCs are peered, security groups can reference peer account security groups directly to restrict traffic between them.

This feature allows specifying the security group ID (sg-1234abcd) from the source account (111122223333) in the target database’s security group inbound rule. AWS automatically validates that the VPCs are connected through an existing VPC peering connection and that mutual permissions are properly configured.

You do not prefix the security group ID with the account or peering connection (Options A and B), and using the destination account ID (Option D) is incorrect because it represents the database side, not the source.

Hence, the correct configuration is Option C, which references the application servers’ security group directly for precise, least-privilege access control.