Pour Chex cereal into a very large bowl and set aside.
Melt chocolate chips, peanut butter, and butter together in a microwave-safe bowl in 30-second intervals, stirring until smooth.
Stir in vanilla extract.
Pour the chocolate mixture over the cereal and fold gently until every piece is coated.
Transfer coated cereal to a large zip-lock bag, add powdered sugar, seal the bag, and shake vigorously until fully coated.
Spread onto a parchment-lined baking sheet, scatter M&Ms over the top, and let cool for 20 minutes before eating.