Preheat oven to 400 degrees. Butter a 1 qt baking dish. Slice potatoes and onion very thin using a mandolin.

Layer 1/2 of potatoes in baking dish. Add a layer of thinly sliced onion. Top with remaining potatoes. Season with salt and pepper.

Over medium heat, melt 3 tbsp butter. Mix in 3 tbsp flour, stir constantly for about a minute. Add 2 cups milk, allow to thicken. Stir in cheese and continue stirring until cheese is melted.

Pour cheese mixture over potatoes. Cover dish with foil and bake for 1 1/2 hours or until potatoes are tender.