Mix the yeast, water, and sugar in a mixer bowl fitted with a dough hook. Let stand until foamy, about 5 minutes. Add the salt, lemon zest, cinnamon, egg, milk, and 1 1/2 cups flour; mix on medium speed until combined. Add the butter; mix until incorporated. Add 1 3/4 cups flour, and mix until the dough comes together. Turn the dough onto a lightly floured surface. Knead in the remaining 1/4 cup flour by hand until the dough is smooth, about 5 minutes.

Place the dough in a lightly olive oiled bowl, cover loosely with plastic wrap, and let stand in a warm, draft-free spot until doubled in size, about one hour. Remove the dough from the bowl. Roll out the dough on a lightly floured surface to 1/2-inch thickness. Cut out with a pizza cutter rectangles. Place on parchment lined baking sheet. Let rise in a warm, draft-free spot for 30 minutes.

Heat the oil in a medium pot or deep fryer until it registers 350ºF on a deep-fry thermometer between a 2 and a 3 on the dial. Fry the beignets in batches, rolling them around constantly with a slotted spoon, until golden brown all over, 1 to 2 minutes. Transfer the beignets with the slotted spoon to a cooling rack that's set over a baking pan and dust with powdered sugar.