Combine milk and butter in a small saucepan. Heat until milk is warm and butter is softened.
Gradually add the milk and butter to the flour mixture; stirring constantly until well blended.
Add two eggs and ½ cup flour.
Add the remaining flour, ½ cup at a time, stirring until well combined.
Add grated lemon peel.
Place dough on a lightly floured surface and knead for about 5 minutes, until smooth and elastic.
Form the dough into a ball.
Generously grease a large bowl with butter and place the dough ball in the bowl, turning to coat with butter.
Cover bowl and let the dough rise in a warm area until it has doubled in size (about 1 hour.)
Remove dough from bowl, and divide it into 2 equal parts. Cover and allow to rest for 10-15 minutes.
Shape dough sections into long rolls or ropes, about 36 inches long and 1 ½ inches in diameter.
Loosely twist ropes into a braided ring making 5 inch spaces for the colored eggs. Optionally, you can make smaller circles with your dough as pictured below if you don’t want a giant piece of bread.
Cover, and allow the dough to rise for another hour.
Carefully insert the raw colored eggs between the dough braids.
Beat egg yolk and 1 tablespoon of water to form an egg wash.
Brush dough with egg wash, being especially careful not to get any on the colored eggs or the dye will bleed.
Preheat oven to 350 degrees Fahrenheit.
Bake 45 to 50 minutes, or until golden brown.
Optional Glaze
In a small bowl add confectioners sugar, milk, and lemon juice, Stir together until smooth, adding more liquid until the mixture is thick, but still liquid enough to be poured over loaf.
Recipe Notes
Some people like to add colored sprinkles and/or a sugar glaze to the bread after baking; I’ve included a simple glace recipe for your convenience.