In a large skillet, melt butter over medium heat. Add onion and shallots, cook for about 10 seconds.
Add chopped squash, Italian seasoning, salt, and pepper, cook and stir occasionally for about 3 minutes or until the yellow squash and zucchini are crisp-tender.
Add garlic, cook for about 30 seconds.
Add heavy cream, cook, until reduced for about 3 minutes. Remove from the heat.
Stir in cheddar cheese, ¼ cup Parmesan cheese, and ¼ cup bread crumbs.
Transfer the mixture into a 2-quart baking dish and sprinkle with ¼ cup bread crumbs and ¼ cup Parmesan cheese. Bake until golden brown for about 8 minutes.
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Notes
Cheddar cheese is an optional ingredient. You may skip it for a lighter sauce.