In a large mixing bowl, combine softened cream cheese and butter until smooth using an electric mixer at medium speed.
Reduce the mixer speed to low. Add one cup of sifted powdered sugar to the cream cheese mixture. Once the powdered sugar is combined, add another cup of sifted powdered sugar. You may need to stop the mixer and scrape down the sides of the bowl to make sure all the powdered sugar is mixed in.
Add the vanilla extract. Continue to beat until the mixture is smooth and creamy.
Spread or pipe the cream cheese icing over a cooled dessert.