Spray the bottom of a casserole dish (measuring approximately seven by 12 or eight by 11 inches) with nonstick cooking spray. Spread cubed challah throughout the pan.

Mix together eggs, milk, one and 1/2 cups grated cheese, Parmesan and pesto. Pour over challah. Mix with tongs to coat well. Allow to sit for about 10 minutes and mix again – try to make sure all pieces of challah are wet with egg mixture.

Preheat oven to 350 degrees Fahrenheit.

Once oven is heated, mix challah mixture one more time, trying to incorporate any egg mixture remaining at the bottom of the casserole dish. Top with remaining cheese.
Bake covered for 20 minutes. Uncover and bake for an additional 10–15 minutes, until nicely browned.