What could be causing this issue?
One of the VPCs is not sized correctly for peering.
There is no public subnet in one of the VPCs.
The route tables have not been updated.
One VPC has disabled the peering flag.
Explanations:
VPC size does not affect the ability to establish a peering connection. Peering is based on CIDR blocks and routing, not VPC size.
A public subnet is not required for VPC peering to work. Resources can communicate over peering regardless of subnet types (private or public).
If route tables are not updated to route traffic through the VPC peering connection, communication will not occur between the VPCs.
There is no specific “peering flag” to disable in a VPC. Peering permissions are based on proper routing and CIDR overlap, not a flag.