Start by preheating your oven to 350°F (175°C) and lining your baking sheets with parchment paper. In a large bowl, cream the softened butter and cream cheese together using a hand or stand mixer until the mixture is light and fluffy. This will take about 2 to 3 minutes. Next, add the granulated sugar and beat again until well incorporated. Then mix in the egg yolk and vanilla extract, blending thoroughly.

In a separate bowl, whisk together the flour, baking powder, and salt. Slowly add the dry ingredients to the wet mixture, beating on low speed until a soft dough forms. Be careful not to overmix, as this can make the cookies tough. If the dough feels too sticky, you can chill it for about 15–20 minutes, although it’s usually ready to use right away.

Using a cookie scoop or tablespoon, form the dough into balls and place them about 2 inches apart on the prepared baking sheets. You can gently press the tops with your fingers or a glass bottom for a flatter shape, or leave them round for a more puffed cookie. Decorate with sprinkles now if you’re baking them for the holidays.

Bake for 10 to 12 minutes, or until the edges are just beginning to turn golden. Do not overbake—they should be soft and pale in the center. Allow them to cool on the baking sheet for 5 minutes, then transfer them to a wire rack to cool completely. The result will be tender, soft, and flavorful cookies that truly live up to the title of the best cream cheese cookies.