Bring a large pot of lightly salted water to a boil. Add the spaghetti and cook for 10–12 minutes, stirring occasionally, until tender but still slightly firm to the bite.
While the pasta cooks, place a large skillet over medium heat. Add the ground beef and diced onion. Cook for about 5 minutes, breaking the beef into smaller pieces, until browned and the onion is soft and translucent.
Stir the condensed cream of mushroom soup, diced tomatoes with green chiles, water, and taco seasoning into the beef mixture. Mix until the sauce is evenly combined.
Add the cubed processed cheese. Stir for approximately 5 minutes, or until the cheese melts completely and the sauce becomes smooth and creamy.
Drain the cooked spaghetti and transfer it directly to the skillet. Toss gently until the pasta is thoroughly coated with the cheesy taco sauce.
Sprinkle shredded sharp Cheddar cheese evenly over the pasta. Cover the skillet and let it stand until the cheese melts.
Serve warm while the cheese is soft and creamy.
