Preheat your oven to 350°F (175°C). Grease a 2-quart baking dish.
In a large skillet over medium heat, add the sliced yellow squash and chopped onion. Sauté for about 5-7 minutes until the squash is tender. Remove from heat and let cool slightly.
In a large mixing bowl, combine the shredded cheddar cheese, crushed crackers, milk, eggs, melted butter, salt, black pepper, garlic powder, and onion powder. Mix until well combined.
Add the sautéed squash and onion mixture to the bowl and stir until everything is evenly coated.
Pour the mixture into the prepared baking dish and spread it out evenly.
Bake in the preheated oven for 30-35 minutes, or until the top is golden brown and the casserole is set.
Remove from the oven and let it cool for about 5 minutes before serving.