In the bowl of a stand mixer fitted with the paddle attachment, beat the butter and sifted powdered sugar on low, then gradually increase to medium-high to prevent a sugar cloud.
Beat for 3 minutes until smooth. Scrape down the bottom and sides of the bowl and paddle.
Add the cream cheese and beat on medium-high for 1 minute until fluffy.
Add the vanilla and beat for 30 seconds until fully incorporated. Scrape down the bowl again as needed.