Melt cream cheese and butter in large saucepan over low heat, stirring constantly until smooth. Gradually stir in powdered sugar; add peppermint and vanilla extracts, stirring until well blended.
Divide cream cheese mixture into 10 (1/4-cup) portions; roll each into a 12-inch rope. Cut into 1/2-inch pieces. Let stand, uncovered, 4 hours or until firm.