Gather all the ingredients. Preheat the oven to 350 degrees F (175 degrees C). Spray a 9x13-inch baking dish with cooking spray.

Bring a large pot of water to a boil. Add potatoes and cook until almost tender, 5 to 10 minutes. Transfer to a colander and rinse with cold water until cool enough to handle. Drain well and set aside.

Melt butter in a large skillet over medium heat. Add onion; cook and stir until tender, about 5 minutes. Stir in flour, Dijon mustard, salt, and pepper; cook for 1 minute. Gradually pour in milk, stirring constantly until sauce is thickened, about 5 minutes. Stir in Cheddar cheese until melted.

Layer ½ of the potatoes in the bottom of the prepared baking dish. Top with 1 ½ cups diced ham and ½ of the Cheddar cheese sauce. Repeat another layer with remaining potatoes, ham, and sauce.

Bake in the preheated oven until the sauce is bubbling and the top of the casserole is golden brown, about 1 hour.