Prepare the Oven and Dish: Begin by preheating the oven to 375°F (190°C). Lightly grease a medium casserole dish with oil or cooking spray so the ingredients do not stick while baking. Setting up the baking dish first helps the assembly move quickly once the ingredients are ready.
Slice the Chicken and Vegetables: Place the chicken breasts on a cutting board and slice them into thin strips. Thin pieces cook faster and blend nicely with the peppers and onions. Next, slice the bell peppers and onion into long strips similar to traditional fajita vegetables.
Season the Chicken: Transfer the chicken strips to a large bowl. Add olive oil, fajita seasoning, garlic powder, paprika, salt, and pepper. Mix everything well so the spices coat each piece evenly. This step builds the bold flavor that defines the casserole.
Combine the Creamy Base: In another bowl, stir together the sour cream and softened cream cheese until smooth. The mixture creates a creamy layer that keeps the casserole rich and moist while baking. If you prefer extra flavor, mix in a pinch of chili powder or cumin at this stage.
Assemble the Casserole: Spread the cooked rice evenly across the bottom of the prepared baking dish. Arrange the seasoned chicken strips over the rice. Next scatter the sliced peppers and onions across the chicken so the vegetables cook evenly.
Add the Creamy Layer and Cheese: Spoon the sour cream mixture over the ingredients and gently spread it across the top. This layer melts slightly during baking and blends with the fajita seasoning. Sprinkle the shredded cheddar and Monterey Jack cheese evenly over everything.
Bake Until Golden: Place the casserole in the oven and bake for about 30 to 35 minutes. During this time the chicken cooks through, the vegetables soften, and the cheese melts into a bubbly golden layer. If the cheese needs more color, allow the casserole to bake a few extra minutes.
Garnish and Serve: Remove the casserole from the oven and let it rest for about five minutes. This allows the layers to settle slightly before serving. Top with chopped cilantro, green onions, and a squeeze of fresh lime for a bright finishing touch.
