1Heat oven to 400ºF. Mix flour, 1/4 cup sugar, the lemon peel, baking powder and salt in large bowl. Cut in butter, using pastry blender or crisscrossing 2 knives, until mixture looks like fine crumbs.
2Mix cream cheese and egg in small bowl until smooth. Gradually stir in milk. Stir cream cheese mixture into flour mixture until dough leaves side of bowl and forms a ball.
3Drop dough by 8 spoonfuls about 2 inches apart onto ungreased cookie sheet. Brush with lemon juice. Sprinkle with sugar.
4Bake 16 to 18 minutes or until golden brown. Immediately remove from cookie sheet. Serve warm.