In 1 quart microwavable bowl, microwave chocolate chips, peanut butter and butter uncovered on high one minute. Microwave about 30 seconds longer or until mixture can be stirred smooth. Stir in vanilla. Pour mixture over cereal, stirring until even coated. Pour into a large brown grocery bag.
Add powdered sugar. Close top of bag tightly and shake until cereal is well coated. Spread on waxed paper to cool. Store in an air-tight container in the refrigerator.