In the bowl of a stand mixer or a large bowl using a spatula, add the room-temperature cream cheese, powdered sugar, peanut butter, and vanilla extract.
In a microwave-safe bowl add 8 oz mini marshmallows, then sprinkle 1 tablespoon of water over the marshmallows. Microwave on high for 1 minute, stir, then heat for an additional 30 seconds if needed.