In a microwavable bowl, add 1 cup chocolate chips, 1/2 cup peanut butter, 1/4 cup butter or margarine and heat for 1 minute on high. Stir and micro. 30 more seconds if needed, until it is smooth.
Add 1 tsp. vanilla and stir.
Drizzle onto cereal and stir well, until all of the cereal is coated.
Put half of the cereal into a gallon ziploc bag and add 3/4 cup powdered sugar. Seal and shake until coated.