Preheat the oven to 350 F. In a large bowl, mix together butter and powdered sugar until fluffy. Add in flour and vanilla extract and mix until combined. Add in the food coloring.
Roll the cookie dough into balls and place onto a large ungreased baking sheet at least 2-inches apart. Bake for 10-12 minutes. Place powdered sugar into a shallow dish. Remove cookies from oven and roll each one in the powdered sugar.