In 1-quart microwave safe bowl, combine chocolate chips, peanut butter, and butter. Microwave on high 1 to 1 1/2 minutes, or until smooth, stirring after 1 minute. Stir in vanilla.

Pour cereal into large bowl. Set aside.

Pour mixture over cereal, stirring until all pieces are coated. Pour into large re sealable plastic bag with powdered sugar. Seal securely and shake until all pieces are well coated. Spread on wax paper to cool.