Make the dough. Combine warm milk with 1 teaspoon sugar and yeast and let sit for 5 minutes or until foamy.
Add flour, ¼ cup sugar, salt, softened butter, and egg to the bowl of a stand mixer. Add yeast mixture and mix to combine. Use dough hook and knead until smooth, about 7-8 minutes. Alternatively, knead the dough by hand. Transfer to a clean bowl and cover. Let rise in a warm area until doubled, about 1 hour.
Meanwhile, make poppyseed filling. Use spice mill or coffee grinder to grind the poppy seeds to a powder. Combine milk and sugar in a small pot and bring to a simmer over low heat. Turn off the heat and add ground poppy seeds, lemon zest, and vanilla, stirring to combine. Let cool completely.
Prepare streusel. Combine flour with brown sugar, melted butter, cinnamon, and a pinch of salt in a medium bowl until well combined. Set aside.
Punch down dough. Lightly dust a clean work counter with flour and roll out dough until it's 18x12 inches. Spread poppyseed filling evenly on top and roll it into an 18-inch long log starting with the long side. Place log with the seam side down on a baking sheet lined with parchment paper. Brush with egg wash and gently press the streusel on the top, lightly flattening the log. Loosely cover and let rise for 20 minutes.
Preheat oven to 350 degrees F.
Bake bread for 40-50 minutes or until golden brown and a toothpick inserted in the center comes out clean. Remove from oven and let cool completely. Dust poppy seed streusel bread with powdered sugar, slice, and serve.