Preheat your oven to 375°F. Line a baking sheet with parchment paper.
In a large mixing bowl, combine the breakfast sausage and softened cream cheese. Mix until well blended.
Add the shredded cheddar cheese, flour, garlic powder, onion powder, paprika, salt, black pepper, cayenne pepper (if using), and diced green chilies. Mix until all ingredients are thoroughly combined.
Using your hands, form the mixture into small balls, about 1 inch in diameter, and place them on the prepared baking sheet.
Bake in the preheated oven for 20-25 minutes, or until the sausage balls are golden brown and cooked through.
Remove from the oven and let cool for a few minutes before serving.