Preheat the oven to 350 F. In a large bowl, combine butter with powdered sugar until fluffy. Add in flour and vanilla extract, and mix until it is fully combined.
Fold in the M&Ms. Roll the cookie dough into balls, and place them onto a large ungreased baking sheet. Bake for 10-12 minutes.
Place the powdered sugar into a shallow dish. Roll the baked cookies into the powdered sugar.