Butter a 9x13-inch baking dish. Place challah in the dish.

Mix 1/4 cup sugar with cinnamon; set aside.

Mix milk, eggs, remaining 1/2 cup sugar, vanilla, and salt together in a bowl. Pour over bread and place butter pieces on top. Sprinkle cinnamon-sugar over top. Cover with foil and refrigerate for 8 hours to overnight.

When ready to bake, preheat the oven to 350 degrees F (175 degrees C).

Bake uncovered in the preheated oven until golden brown, 30 to 45 minutes. Remove from the oven and serve warm.