Slice the yellow squash into 1/2-inch thick rounds and finely dice the onion into 1/4-inch pieces. In a small bowl, combine the salt, onion powder, garlic powder, black pepper, and cayenne pepper—mixing them together ensures even seasoning distribution throughout the dish. Crush the crackers into small, coarse crumbs (you want some texture, not fine breadcrumbs) and set aside. I like to do all my prep work first so I can focus on the cooking without interruption.

Heat a large skillet over medium-high heat and add the sliced squash and diced onion. Sprinkle with the spice mixture from Step 1 and cook for 10 minutes, stirring occasionally, until the squash is tender and begins to release its moisture. The squash will soften and the onion will become translucent as it cooks. Transfer the cooked mixture to a bowl and let it cool for 5-10 minutes so it's manageable to work with.

Once the squash mixture has cooled slightly, stir in the mayonnaise, sour cream, and sharp cheddar cheese until everything is evenly combined. Gently fold in the fresh thyme leaves, which will add a subtle herbaceous note to balance the richness. I find that stirring in the creamy ingredients while the squash is still warm helps them distribute more smoothly and creates a cohesive sauce.

Preheat your oven to 375°F. Grease a 9x13 inch baking dish lightly with butter or cooking spray, then transfer the squash mixture into the prepared dish and spread it evenly. Toss the crushed crackers from Step 1 with the melted butter until they're lightly coated, then sprinkle them evenly over the top of the casserole. The buttered crackers will toast and create a golden, crunchy crust.

Place the casserole in the preheated 375°F oven and bake for 30 minutes, until the top is golden brown and the filling is hot throughout. Remove from the oven and let it rest for 5-10 minutes before serving—this allows the casserole to set slightly and makes it easier to portion without falling apart.