01 - Preheat oven to 400°F. Lightly grease a large 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. Stir until evenly blended.
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. Gradually whisk in the whole milk and continue cooking until the mixture thickens slightly, about 2 to 3 minutes.
05 - Reduce heat to low. Stir in the drained diced tomatoes with green chilies. Add the shredded cheddar and Monterey Jack cheeses, stirring continuously until fully melted and smooth.
06 - Pour the queso sauce evenly over the seasoned chicken breasts in the baking dish, ensuring each piece is well coated.
07 - Bake uncovered for 25 to 30 minutes, or until the chicken is cooked through, the juices run clear, and the internal temperature reaches 165°F.
08 - Remove from the oven and garnish with chopped cilantro, sliced jalapeño, and diced red onion as desired. Serve immediately while hot.