Preheat oven to 350 degrees F (175 degrees C).

Melt butter in a medium saucepan over medium heat. Saute onion for 2 minutes. Stir in flour and cook 1 minute, stirring constantly. Stir in milk, salt, mustard and pepper; cook, stirring frequently, until mixture boils and thickens.

Meanwhile, bring a pot of lightly salted water to a boil. Add macaroni and cook for 8 to 10 minutes or until al dente; drain.

To the milk mixture add the Cheddar and American cheeses; stir until cheese melts. Combine macaroni and cheese sauce in a 2 quart baking dish; mix well.

Bake in preheated oven for 30 minutes, or until hot and bubbly. Let cool 10 minutes before serving.