Gather all your ingredients.

In a medium saucepan, combine Velveeta cheese and shredded cheddar.

Add the diced tomatoes with green chilies.

Pour in the milk and mix well.

Stir in the diced onions and jalapeño if using.

Heat the mixture over medium-low heat, stirring frequently.

Continue cooking until the cheese is fully melted and smooth.

Season with garlic powder, salt, and pepper to taste.

Once melted, remove from heat.

Serve warm with tortilla chips or as a topping for your favorite dishes.