Prepare your workspace by lining a baking sheet with parchment paper.
In a microwave-safe bowl, combine the semi-sweet chocolate chips, peanut butter, and unsalted butter. Microwave on high for 30-second intervals, stirring in between, until melted and smooth. This usually takes about 1-2 minutes.
Stir in the vanilla extract once the mixture is fully melted.
In a large mixing bowl, add the Rice Chex cereal. Pour the melted chocolate mixture over the cereal and gently stir with a rubber spatula until all the cereal is evenly coated.
Add the powdered sugar to a large zip-top bag. Carefully transfer the coated Chex mixture into the bag, seal it, and shake until all pieces are coated in powdered sugar.
Pour the puppy chow onto the prepared baking sheet and spread it out to cool.
Once cooled, mix in the holiday-themed M&M's and sprinkles on top of the puppy chow.
Allow the mixture to set for about 10 minutes before serving or packaging.
Store leftovers in an airtight container at room temperature for up to a week.