Preheat oven to 350°F (175°C). Spray a muffin tin with nonstick cooking spray.
Divide the cold butter (2 tablespoons) and 1/4 cup light brown sugar evenly among the 12 muffin cups. Place a small piece of butter and a spoonful of brown sugar into each.
Slice peaches and place about 4 slices into the bottom of each muffin cup. Dice any leftover peach pieces and set aside for the batter.
In a mixing bowl, cream 1/3 cup softened butter, 1/2 cup granulated sugar, and 1/4 cup light brown sugar for about 3 minutes until light and fluffy.
Add the egg and vanilla (2 tsp) to the butter mixture and mix until fully combined.
In a separate bowl, whisk together 1 1/4 cups all-purpose flour, 1 tsp baking powder, 1/4 tsp salt, and 1 tsp cinnamon.
Add the dry ingredients to the wet mixture in batches, alternating with 1/2 cup milk, mixing until just combined.
Fold in the reserved diced peaches gently by hand—avoid overmixing.
Spoon the batter into the muffin tin, covering the peach slices and filling each cup nearly to the top.
Bake for 20–24 minutes, or until golden brown and a toothpick inserted comes out clean.
Cool the cakes in the pan for 5 minutes, then carefully invert the tray onto a wire rack to release the cakes.
Let cool completely, or serve warm with optional toppings like ice cream or caramel sauce.