Step 1: Preheat Oven : Preheat oven to 375°F (190°C). Grease a 9x13-inch casserole dish lightly with cooking spray or butter.
Step 2: Cook Chicken : Heat 1 tbsp olive oil in a skillet over medium-high heat. Add diced chicken, season with chili powder, smoked paprika, cumin, garlic powder, onion powder, salt, and pepper. Cook for 5–7 minutes until chicken is lightly browned but not fully cooked (it will finish in the oven). Remove from heat and set aside.
Step 3: Sauté Vegetables : In the same skillet, heat remaining olive oil. Add sliced bell peppers and onion. Cook for 5–6 minutes until slightly softened but still vibrant.
Step 4: Prepare Cheese Mixture : In a medium bowl, combine sour cream, cheddar cheese, Monterey Jack cheese, lime juice, and smoked paprika. Mix until smooth.
Step 5: Assemble Casserole : Combine chicken, sautéed vegetables, and cheese mixture in a large bowl. Transfer mixture to prepared casserole dish and spread evenly. Sprinkle 1 cup shredded cheese on top.
Step 6: Bake : Bake in preheated oven for 20–25 minutes until cheese is melted, bubbly, and slightly golden. Remove from oven and let rest for 5 minutes.
Step 7: Serve : Garnish with chopped cilantro and sliced jalapeños, if desired. Serve with warm tortillas, rice, or enjoy as is.