Cook potato in boiling water to cover 5 minutes; drain.
Layer one-third potato slices, one-third onion slices, and one-third cheese slices in a lightly greased 13- x 9-inch baking dish. Sprinkle with 1/4 teaspoon salt and 1/4 teaspoon pepper. Repeat layers twice with remaining potato, onion, cheese slices, salt, and pepper. Top with Cheddar cheese.
Melt butter in a heavy saucepan over low heat; add flour, whisking until smooth. Cook, whisking constantly, 1 minute. Gradually whisk in milk until smooth. Remove from heat; pour over potato mixture.
Bake at 400° for 35 minutes or until golden. Let stand 10 minutes before serving.
I first made this in 2000 and over the years it has become a requested dish in my house. It is great for large gatherings and holidays and when I don't make it, my family asks "why" Its easy and delicious.