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 thoroughly until evenly incorporated.
03 - Pat the chicken breasts dry with paper towels. Season both sides generously and evenly with the prepared 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 smooth roux. Gradually whisk in the whole milk and continue cooking for 2 to 3 minutes, whisking frequently, until the mixture thickens slightly.
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 completely melted and the sauce is smooth and creamy.
06 - Pour the queso sauce evenly over the seasoned chicken breasts in the baking dish, ensuring each piece is well covered. Bake uncovered for 25 to 30 minutes, or until the chicken reaches an internal temperature of 165°F and the juices run clear.
07 - Remove from the oven and let rest for 3 to 5 minutes. Garnish with chopped fresh cilantro, sliced jalapeño, and diced red onion as desired. Serve immediately while hot.