Preheat oven to 350 degrees F. Mix ground beef, bread crumbs, milk, onions, salt and pepper together in a medium mixing bowl. Form into 1 1/2- inch balls. Place on baking sheet and bake for 20 to 25 minutes.
While the meatballs are baking mix the sauce ingredients together.
When meatballs are done, drain off the grease and place meatballs into a casserole dish and pour the sauce over them. Put casserole into oven and bake for 15 minutes.