Preheat your oven to 350°F (175°C) and line an 8x8 baking dish with parchment paper.
Mix flour, butter, and 1/4 cup sugar until crumbly, then press into the dish to form the crust.
Bake the crust for 10–12 minutes, until lightly golden.
While the crust is baking, beat the softened cream cheese until smooth.
Add the remaining 1 cup of sugar, eggs, lemon juice, lemon zest, and vanilla; mix until fully combined.
Pour the lemon cream cheese filling over the hot crust.
Bake for an additional 15–18 minutes until the center is just set.
Cool at room temperature for 10–15 minutes, then refrigerate for 1 hour.
Slice into squares and dust with powdered sugar before serving.
These lemon squares with cream cheese are best chilled and served cold for optimal texture.