Cut parchment paper to fit an 8×8-inch pan, leaving extra overhang on the sides for easy removal.
Add 1 tablespoon of water to the bottom of the pan to help hold the parchment in place, then line the pan.
In a microwave-safe bowl, combine butter and peanut butter. Heat for 60 seconds, then stir until smooth.
Stir in vanilla extract until fully incorporated.
Gradually add powdered sugar, one cup at a time, stirring well between each addition until smooth and thick with no lumps.
Transfer the mixture into the prepared pan and spread evenly using a spatula.
Place an additional piece of parchment paper on top and smooth the surface.
Refrigerate for at least 2 hours, or until firm.
Remove from the fridge and lift the fudge out using the parchment overhang.
Score and cut into small squares using a warm, sharp knife.
Garnish with M&M’s if desired.
Serve and enjoy.