In large bowl, measure cereal and set aside.
In a 1 quart microwaveable bowl, microwave chocolate chip, peanut butter, and butter uncovered on high for 1 minute, stir. Microwave 30 seconds longer or until mixture is smooth. Stir in vanilla. Pour mixture over cereal, stirring until evenly coated. Pour into a 2 gallon resealable plastic bag.
Add powdered sugar. Seal bag, shake until well coated. Spread on waxed paper to cool. Store in airtight container.