Measure out Chex cereal into a large bowl and set aside.
Microwave chocolate chips, peanut butter and butter using 30-second intervals, stirring in between each one, until completely smooth and melted. Stir in vanilla.
Pour melted chocolate mixture over cereal and stir to coat evenly.
Measure out 1 cup of powdered sugar into the bottom of a large Ziploc bag. Pour in coated cereal and top with remaining 1/2 cup of powdered sugar. Seal bag closed and shake to coat.
Spread finished puppy chow onto a parchment paper-lined baking sheet and separate any large chunks. Sprinkle over any extra powdered sugar as needed. Once cooled and at room temperature, store in airtight containers or bags for up to 10 days at room temperature or 2 weeks in the fridge.