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Heat 1 cup of milk to about 95°F (35°C). You can use the microwave or stovetop. Pour the warm milk into the bowl of an electric stand mixer fitted with the dough hook attachment (or you can use a handheld mixer or no mixer, but a stand mixer is ideal). Manually whisk in the yeast and 2 teaspoons of the granulated sugar. Cover the bowl with a clean towel. The mixture should be frothy and foamy after 5 minutes.
On low speed, beat in the remaining sugar and the softened butter until butter is slightly broken up. Next beat in 1 whole egg plus 1 egg yolk (reserve the egg white) and the salt. The butter won’t really be mixing in, so don’t be alarmed if it stays in pieces. On low speed, gradually add the flour. Once it is all added, beat on medium speed until a soft dough forms, about 1 minute.
Increase speed to medium-high and beat until the dough is soft and supple and pulls away from the sides of the bowl, about 6 minutes. If you do not have a stand-mixer with a dough hook attachment, knead the dough by hand in this step.
Turn it out onto a lightly floured surface and form into a ball. Place into a large greased bowl, turning once to grease the top. (I just use the same mixing bowl that I made the dough in– remove the dough, grease it with nonstick spray or olive oil, put the dough back in.) Cover the bowl with plastic wrap and place it in a warm environment to rise until doubled, about 90 minutes. For this warm environment, I preheat the oven to 200°F (93°C) then turn the oven off and place the bowl inside the warm-ish oven. Leave the oven door cracked a bit.
Once doubled in size, punch down the dough to release any air bubbles. Remove dough from the bowl and turn it out onto a lightly floured surface. Punch down again to release any more air bubbles if needed. Using a sharp knife or dough scraper, cut dough in half. Work with only half of the dough at a time. Place a clean towel over the dough you aren’t working with.
Generously grease two 9×5 inch loaf pans with butter or nonstick spray.
On slightly floured work surface, roll one dough half out into a 9×13 inch rectangle (approximately). Spread with 1 cup of Nutella, leaving a 1/2 inch border uncovered.
Watch the video above to see exactly how I do this step. Tightly roll the dough into a 13-inch log. Place the log on its seam. Using a sharp knife, cut the log in half lengthwise. I find a serrated knife works best. Criss-cross one half, cut side down, on top of the other half– forming an X. Twist the two together. Place in prepared loaf pan and cover with a clean towel. Repeat with 2nd half of dough. This step can get a little messy!
Allow both shaped (and covered) loaves to rest for 10-20 minutes as you prepare the crumble topping and preheat the oven.
Preheat the oven to 350°F (177°C).
Mix the brown sugar, flour, and cinnamon together in a medium bowl. Using a pastry cutter, cut the cold butter into the brown sugar mixture until coarse crumbs are formed. Set aside.
Whisk the remaining 2 Tablespoons of milk with the leftover egg white. This is your egg wash. Using a pastry brush, brush the babka loaves with egg wash. Do the best you can as some Nutella is exposed. Top each loaf with crumble topping.
Bake for 45-50 minutes or until babka is golden brown on top. Gently tap the loaves– if they sound hollow, the bread is done. Remove from the oven, place each pan on a wire rack, and allow to cool for 10 minutes before slicing and serving.
Cover and store leftover babka at room temperature for a couple days or in the refrigerator for 1 week. (It won’t last that long!!) You can also freeze the baked babka for up to 3 months, then thaw overnight in the refrigerator. Bring to room temperature before serving. Or warm it up in the oven.