Add the cottage cheese to a blender or food processor. Blend until completely smooth and creamy. This step is important because it removes the curds and creates a texture that looks and tastes like traditional queso.

In a small bowl, toss the shredded cheddar cheese with cornstarch. This helps the cheese melt smoothly later. It also prevents the dip from becoming grainy or separating during cooking.

Pour the blended cottage cheese into a medium saucepan. Add the milk, garlic powder, onion powder, smoked paprika, salt, and black pepper. Stir well and heat over medium-low heat until warm.

Slowly add the cheddar cheese mixture while stirring constantly. Continue stirring as the cheese melts. The dip will become thicker and creamier. Take your time to ensure everything blends together smoothly.

Add the diced green chilies and lime juice. Stir well until evenly combined. The chilies add a mild kick while the lime juice brightens the flavor and balances the richness.

Continue cooking for another two to three minutes. Stir often to keep the dip smooth. Once it reaches your desired consistency, remove it from the heat and stir in the cilantro.

Transfer the warm dip to a serving bowl. Garnish with extra cilantro if desired. Serve immediately with tortilla chips, vegetables, crackers, or your favorite dipping snacks.