In 2-quart saucepan, heat butter, peanut butter and milk over medium-low heat, stirring constantly, until butter and peanut butter are melted. Heat to boiling; remove from heat. Stir in vanilla. Working quickly, add powdered sugar, 1 cup at a time, beating with whisk until incorporated and icing is smooth. Immediately spread icing over cake. Sprinkle with peanuts. Store loosely covered.