Preheat oven to 350 degrees F. Combine peaches, 1 cup sugar and water in a saucepan and mix well (this will be syrup used later). Bring to a boil and simmer for 10 minutes. Remove from the heat.
Put butter in a deep baking dish and place in oven to melt. Mix remaining 1 cup sugar, flour and milk slowly to prevent clumping. Pour mixture over melted butter. Do not stir. Spoon fruit on top, gently pouring in syrup.
Batter will rise to top during baking. Bake for 30-45 minutes. To serve, scoop onto a plate and serve with your choice of whipped cream or vanilla ice-cream.