Gather all ingredients.

Heat milk, water, and butter together in a saucepan over medium heat until bubbling, then let cool to 120–130°F.

Mix flour, sugar, salt, and yeast in a separate bowl. Mix egg into the warm milk mixture.

Pour the milk mixture and 1/3 of the dry mixture into a mixing bowl and beat until moistened. Gradually add the remaining dry ingredients to form the dough.

Knead the dough on a floured surface for 8 minutes. Cover and let rise in a warm place until doubled, about 1–2 hours.

Punch the dough down and roll it into a 16x12-inch rectangle. Spread softened butter evenly over the surface.

Mix brown sugar and cinnamon, then sprinkle evenly over the dough.

Roll up the dough and cut into 12 rolls. Place them in a greased 9×13-inch dish. Cover and let rise overnight or at least 8 hours.

Preheat oven to 375°F and bake rolls until golden brown, about 17 minutes.

Make the icing by combining cream cheese, butter, milk, vanilla, and confectioners' sugar until smooth.

Flip cinnamon rolls onto a cooling rack and let cool slightly for 5–10 minutes.