GRATE potatoes, then the onion using the large hole of a box grater. Place grated vegetables in the center of a large clean kitchen towel. Bring up the ends of the towel and twist together to form a pouch. Hold the bundle over the sink, then squeeze out as much excess moisture from the vegetables as possible. Place vegetable mixture in large bowl. Add egg, flour, salt and pepper; mix well.

HEAT oil in medium nonstick skillet on medium-high heat. Carefully drop tablespoonfuls of the vegetable mixture into skillet; spread each into thin circle with back of spoon. Repeat to cook 2 to 3 latkes at a time. Cook 3 to 4 min. on each side or until golden brown on both sides. Remove latkes from skillet; drain on paper towels.

SERVE each latke topped with 1 tsp. of the sour cream; sprinkle lightly with chives. Serve warm.