01 - Preheat oven to 400°F. Lightly grease a 9x13-inch baking dish with butter or nonstick spray.
02 - In a small bowl, combine the chili powder, smoked paprika, cumin, garlic powder, onion powder, salt, and black pepper. Mix until evenly incorporated.
03 - Pat the chicken breasts dry with paper towels. Season both sides generously with the spice blend, pressing gently to adhere. Arrange the seasoned breasts in the prepared baking dish.
04 - In a medium saucepan over medium heat, melt the butter. Stir in the cornstarch and cook for 1 minute, stirring constantly to form a light roux.
05 - Gradually whisk in the whole milk, ensuring no lumps remain. Continue cooking and whisking for 2 to 3 minutes until the mixture thickens slightly.
06 - Reduce heat to low. Stir in the drained diced tomatoes with green chilies, then add the shredded cheddar and Monterey Jack cheese. Stir continuously until fully melted and the sauce is smooth.
07 - Pour the queso sauce evenly over the seasoned chicken breasts in the baking dish. Bake uncovered for 25 to 30 minutes, until the chicken reaches an internal temperature of 165°F and juices run clear.
08 - Remove from the oven and let rest for 5 minutes. Garnish with chopped cilantro, sliced jalapeños, and diced red onion as desired. Serve immediately while hot.