In a large bowl, beat together the butter and cream cheese with an electric mixer. With the mixer on low speed, add the powdered sugar a cup at a time until smooth and creamy. Beat in the vanilla extract.
I prefer my cream cheese frosting a lot less sweet. Usually mix 8oz cream cheese, 4oz butter and 2/3 cup powdered sugar. It's tangy, plenty sweet and always gets raving reviews from anyone that tries it.