Cut out two pieces of parchment paper. One should be big enough to line an 8x8 baking dish with enough overhang to lift the fudge out of the dish. The other should be just the right size to sit on top of the fudge.
Add a tablespoon of water to the bottom of the baking dish and line the pan with the larger piece of parchment paper.
In a medium-sized microwave-safe bowl, add the unsalted butter and the creamy peanut butter. Heat in the microwave for 60 seconds and then stir. Add the vanilla extract and stir again.
Slowly add the powdered sugar, one cup at a time, whilst stirring. Continue to stir until completely combined with no lumps or white streaks.
Pour the fudge mixture into the baking dish and spread it out evenly with a spatula.
Place the smaller piece of parchment paper on top of the fudge to help smooth the top. Leave it in place and put the fudge in the refrigerator to chill for two hours.
Remove the fudge from the refrigerator. Remove the top piece of parchment paper. Using a sharp kitchen knife, pre-score the size and number of the serving pieces of fudge, but do not cut the fudge until you remove it from the pan.
Using the over-hang pieces of paper, lift out the fudge, and place it on a cutting board.
Warm a large, sharp knife under hot water. Dry it and slice the fudge.
Once the pieces are cut, place 2 to 3 red and green M&M’s on the top of the fudge for decoration.