In a microwave-safe bowl, combine chocolate chips, peanut butter, and butter. Microwave in 30-second intervals, stirring each time, until smooth.
Stir in the vanilla extract.
Place the cereal in a large mixing bowl. Pour the melted chocolate mixture over it and gently stir to coat all the pieces.
Add the powdered sugar. Either stir it in gently or shake everything together in a large sealed bag until fully coated.
Once cooled, mix in M&M's and pretzels.
Store in an airtight container or portion into small gift bags for sharing.