Before you start cooking: Take 1 stick unsalted butter and 4 ounces cream cheese out of the refrigerator at least two hours in advance to allow them to come to room temperature.
Put the butter, cream cheese, and 1 ¼ cups all-purpose flour in a large bowl. Begin mixing the ingredients with a fork. Once the dough has come together into a homogeneous mass, knead it with your hands until smooth.
Wrap the dough in plastic wrap and place it in the freezer for 10-15 minutes, but no longer.
Lightly dust the work surface with flour to prevent the dough from sticking. Roll the dough into a rectangle, as evenly as possible, to a thickness of ⅛ inch.
Cut the rolled-out dough into squares of approximately 2 ½ inches. Place about 1 to 1 ½ teaspoons of filling in the middle of each square.
Using a kitchen knife, lift opposite corners of the dough and fold them one by one over the filling. Press the folded ends of the dough together to seal.
Carefully transfer the Kolacky cookies to a baking sheet lined with parchment paper.
Preheat the oven to
340 °F. Place the baking sheet with kolacky in the preheated oven and bake for about 15 minutes, until golden. After baking, let the Kolacky cookies cool slightly, then sprinkle them with powdered sugar and serve.