Thermoelectric (TE) air cooling is a solid-state technology that has the potential to replace conventional vapor compression-based air conditioning. In this paper, we present a detailed system-level modeling for thermoelectric air conditioning system with position-dependent (graded) and constant material properties. Strategies for design optimization of the system are provided in terms of cost-performance trade-off. Realistic convection heat transfer at both sides of the system are taken into account in our modeling. Effects of convection heat transfer coefficients, air flowrate, and thermoelectric material properties are investigated with varying key parameters such as TE leg thickness, module fill factor, and input current. Both constant material properties and graded properties are considered for the TE materials, and they are compared in terms of the degree of cooling, coefficient of performance (COP), and power consumption. For graded materials, we employ one-dimensional finite element methods to solve the coupled electrical and thermal current equations with arbitrary profile of material properties varying with position along the TE legs. We find that graded materials can enhance the degree of cooling, but only at the expense of COP, compared to the case of constant property materials. With constant material properties of ZT = 1 and relatively low electric current, the power consumption of TE coolers can be lower than those of conventional air conditioners at an equivalent cooling capacity. Considering additional advantages such as demand-flexible operation, low noise, and high scalability, thermoelectric cooling could be a competitive technology for future air conditioning applications..