Preheat oven to 350 degrees. Line 2 or 3 cookie sheets with parchment paper or silicone liners, set aside.
In an electric stand mixer fitted with a paddle attachment, beat the butter and 1/4 cup powdered sugar on high until light and fluffy, 2 to 3 minutes. Beat in vanilla. With the machine running, gradually add the flour until incorporated. Beat in the Nutella.
Roll the dough into 36 (1 1/2 inch) balls and place onto baking sheets. Bake until the bottoms of the cookies flatten out slightly. 10 to 15 minutes. Cool for 5 minutes, transfer to wire rack to cool completely.
Place remaining 1 cup powdered sugar in a medium bowl. In batches roll the cookies in the sugar until coated. Store in an airtight container at room temperature.