In a large mixing bowl, combine softened butter, cream cheese, vanilla extract, and egg. Beat on medium speed for 2-3 minutes until fluffy.

Gradually add yellow cake mix to the wet mixture and mix on low speed until just combined.

Cover the bowl with plastic wrap and refrigerate the dough for 30 minutes to 1 hour.

Preheat your oven to 350°F (175°C) and line a baking sheet with parchment paper. Roll the chilled dough into 1-inch balls, then roll in sprinkles and dust with powdered sugar.

Place the coated dough balls on the prepared baking sheet, spacing about 2 inches apart. Bake for 10-12 minutes until edges are golden.

Allow cookies to cool on the baking sheet for 5 minutes before transferring to a wire rack.