Preheat your oven to 350°F (175°C) and prepare an 8×8 inch baking dish by lining it with parchment paper or greasing it with butter.

Combine all-purpose flour and powdered sugar, cut in very cold butter until the mixture resembles coarse crumbs. Press into the prepared dish and bake for 12-15 minutes until lightly golden; let cool.

Dice the peaches and toss them with granulated sugar and lemon juice, allowing to sit for 10 minutes.

Beat softened cream cheese and granulated sugar until smooth, then add egg and vanilla extract, mixing until fully combined.

Spread the cheesecake filling over the cooled crust, arrange peaches on top, and bake for 30-35 minutes ensuring center is slightly jiggly.

Whisk powdered sugar, milk, and vanilla extract until smooth for the glaze. Adjust milk to desired consistency.

Once cooled, drizzle glaze over the bars and refrigerate for at least 2 hours before slicing.