PREHEAT oven to 400° F. Lightly grease baking sheet.
COMBINE flour, cheese, dry milk, chives, sugar, baking powder and salt in medium bowl. Cut in butter with pastry blender or 2 knives to make coarse crumbs. Stir in water just until moistened.
KNEAD dough 10 times on lightly floured surface. Pat into 8 x 6-inch rectangle. Cut into 12 biscuits. Place biscuits about 2 inches apart on prepared baking sheet.
BAKE for 12 to 16 minutes or until light golden brown. Serve warm.
• Sharp cheddar cheese can be used for a more intense cheddar flavor.
• For a spicy biscuit, add 1/4 teaspoon chili powder into flour mixture.
• For round biscuits, cut dough with 2-inch-round cookie cutter. Repeat with trimmings.