Environmental DNA (eDNA) applications are transforming the standard of characterizing aquatic biodiversity via the presence, location and abundance of DNA collected from environmental samples. As eDNA studies use DNA fragments as a proxy for the presence of organisms, the ecological properties of the complex and dynamic environments from which eDNA is sampled need to be considered for accurate biological interpretation. In this review, we discuss the role that differing environments play on the major processes that eDNA undergoes between organism and collection, including shedding, decay and transport. We focus on a mechanistic understanding of these processes and highlight how decay and transport models are being developed towards more accurate and robust predictions of the fate of eDNA. We conclude with five recommendations for eDNA researchers and practitioners, to advance current best practices, as well as to support a future model of eDNA spatio-temporal persistence.