In a large saucepan, melt butter over low heat. Stir in flour, salt and pepper until smooth. Gradually add milk. Bring to a boil; cook and stir until thickened (approx. 2 minutes).
Remove from heat; stir in cheese until melted. Add potatoes and onion.
Transfer to a greased 2-qt. baking dish. Cover and bake 1 hour. Uncover; bake until the potatoes are tender (approx. 30-40 minutes).
Recipe by Von Thun Farms at https://vonthunfarms.com/au-gratin-potatoes/