Line an 8x8 inch square baking pan with parchment paper, leaving an overhang on two sides for easy removal.

In a medium microwave-safe bowl, combine 1 cup peanut butter and 0.5 cups butter. Heat in 30-second intervals, stirring between each, until completely melted and smooth.

Stir the vanilla extract into the melted peanut butter mixture.

Gradually add the powdered sugar to the peanut butter mixture, stirring until the mixture is thick and well combined.

Transfer the peanut butter mixture into the prepared pan and press into an even layer using a spatula.

In a small microwave-safe bowl, combine the chocolate chips and 0.25 cup peanut butter. Microwave in 30-second intervals, stirring until smooth and glossy.

Spread the chocolate mixture evenly over the peanut butter base layer.

Scatter the chopped peanut butter cups over the chocolate layer and press them gently into the surface.

Refrigerate the fudge for at least 2 hours, or until completely firm.

Lift the fudge out of the pan using the parchment paper and cut into 36 squares with a sharp knife.