Begin by thinly slicing 6 medium yellow squash and 1 large yellow onion. Aim for about ¼-inch slices so the vegetables cook evenly and become perfectly tender.
In a large skillet or wok, melt 3–4 tablespoons of butter over medium heat. Add the sliced squash and onions to the pan.
Sauté them, stirring occasionally, for about 8–10 minutes until the onions turn soft and translucent and the squash is just becoming tender. You want them cooked but still slightly firm since they’ll continue baking later in the casserole.
Transfer the cooked squash and onions into a large mixing bowl.
Add the roasted green chiles, shredded sharp cheddar cheese, grated parmesan cheese, sour cream, salt, and black pepper.
Gently fold everything together until the vegetables are evenly coated and the mixture is well combined. Be careful not to mash the squash — you want to keep some texture.
Lightly grease a 2-quart baking dish with butter or cooking spray, then pour the squash mixture into the dish and spread it out evenly.
In a small bowl, combine the remaining parmesan cheese, breadcrumbs, and 1 tablespoon of melted butter. Stir until the crumbs are moistened and crumbly.
Sprinkle this breadcrumb-parmesan mixture generously over the top of the casserole for that perfect golden, crunchy crust.
Preheat your oven to 350°F (175°C).
Place the assembled casserole in the oven and bake uncovered for 20–25 minutes, or until the breadcrumb-parmesan topping is beautifully golden brown and crispy.
Once done, carefully remove the dish from the oven and let it rest for 5–10 minutes. This allows the casserole to set up slightly, making it easier to serve while staying nice and creamy.
Garnish with a sprinkle of fresh chopped parsley for a pop of color and brightness, if desired.