Place the butter and cream cheese in a stand mixer fitted with the paddle attachment, or place them into a large mixing bowl and use a hand mixer.
Mix on medium speed for 3 minutes, or until the butter and cream cheese are very smooth and well incorporated.
Stop the mixer and add the sugar to the bowl. Mix the frosting on low speed for 2 minutes, then raise the speed to medium low. Beat for another 2-3 minutes, or until the frosting is very smooth and a bit fluffy.
Add the vanilla extract to the bowl, then beat the frosting for another 30 seconds to incorporate the vanilla fully.
Use the frosting right away, or store it in the fridge for up to 1 week. Be sure to bring it to room temperature before using it for decoration.