Using a stand mixer with paddle attachment (or hand mixer) beat butter on medium until creamy.
Add cream cheese, caramel and vanilla. Beat on medium until fully incorporated. Increase speed to high and continue beating until light and fluffy. Scrape down sides of bowl as necessary.
Reduce speed to low and gradually add icing sugar until well combined. Increase speed to high and beat until well combined and smooth. Scrape bowl as necessary. Will take approximately 2 minutes.