We are US citizens flying Air Canada to Prague and 3+ hours later flying Adria Air on to Ljubljiana. Our Adria Air tickets are separate from our Air Canada tickets. We will land Prague terminal 1 and depart terminal 2. Unsure of the procedure regarding customs. I believe we will collect our luggage from Air Canada and need to check in and check our luggage through Adria Air. Do we need to clear customs in Prague?
Since both Air Canada and Adria Airways are Star Alliance members, see if you can get the bags automatically transferred on to Ljubljana. Then you will go through customs at Ljubljana. However customs is normally just a matter of walking out the "Nothing to Declare" door with you luggage. If it is a direct flight from Canada to Prague, you will go through Schengen immigration (passport stamp) at Prague airport.
If the luggage gets transferred by the airline then it's straightforward but at some point you'll need boarding passes so it may be that you'll need to stop at the appropriate flight handlers which are located between the A and B gates around the corner from T1 passport control.
If the above is sorted then if you arrive at T1 then that will be gates A or B. You stay flight side and take the signs for T2 and you'll pass through a hand-luggage x-ray check before you get to the C&D gates (T2). If you have to manually transfer the luggage then you collect from T1 reclaim then walk over to T2 and check-in. You can't take liquids into T2 via the departure area or the transit area.
Even if you need to clear customs, Vaclav Havel Airport is tiny, and you should have no problem. The centers of terminals 1 and 2 are only a couple of hundred meters apart, if that. The worst case scenario--going through passport control, picking up your bags, going through customs, and going to your next flight--will still leave you with time to relax and get a beer. And you may not even need to do all of this. The customs guys are not particularly rigorous, incidentally. We lived in Prague for 4 years and flew in and out of that airport many times, and the only time they ever stopped us was when we brought in our basset hound when we moved there. They didn't even look at our meticulously and laboriously obtained paperwork; they just scanned our dog to make sure she was chipped and waved us through! Enjoy Ljubljana!
Are you talking about customs or immigration?
Yes to what Emily says. This may be a case of the usual confusion between Customs and Immigration.
Customs is the check on goods, the contents of your luggage. It will occur wherever you pick up your bags. But, customs is a random check only, 95%+ are not stopped. Wherever it happens it takes zero time (exactly how long it takes to walk past a desk), so no issue.
Immigration (aka Passport Control) is the check on people, whether you are allowed into the country and for how long. This can take, depending on how busy they are, 30-90 minutes. This will happen wherever you first enter the Schengen Area.In your case in Prague. There will be no immigration check landing in Ljubljana.
3 hours should be enough to go through immigration, collect your bags and check in again. Do not dawdle.
However if your first flight is late arriving you are not covered, and if as a result you miss your second flight you will need to buy a new ticket.