Line an 8x8-inch baking dish with parchment paper or aluminum foil, ensuring it covers the sides for easy removal. Lightly coat the lined pan with non-stick cooking spray and set it aside.

In a microwave-safe medium bowl, combine the chocolate chips, sweetened condensed milk, and butter. Heat the mixture in 30-second intervals, stirring well after each interval, until the chocolate is fully melted and the mixture is smooth and glossy. Add the vanilla extract and mix thoroughly to enhance the flavor.

Transfer the melted fudge mixture into the prepared baking pan. Use a rubber spatula to spread it evenly, ensuring the surface is smooth. Sprinkle the top generously with festive Christmas sprinkles to give the fudge a cheerful holiday appearance.

Refrigerate the fudge for approximately two hours, allowing it to set and firm up. Once set, remove the fudge from the pan and place it on a cutting board. Slice into 1-inch squares for perfect bite-sized pieces, following any cutting tips provided for clean, neat edges.

Store the fudge in an airtight container in the refrigerator until ready to serve or gift, ensuring it stays fresh and delicious.