Line an 8×8-inch pan with aluminum foil. Grease the foil generously with butter and set aside. In a heavy saucepan, melt the Tootsie Rolls, peanut butter and butter over low heat, stirring constantly. Gradually stir in the confectioners’ sugar, milk and vanilla. Mixture will be thick.
Spread into prepared pan. Using a sharp knife, score the surface into 1-inch squares. Press M&Ms candies into the center of each square. Let fudge completely cool. Lift foil from pan and set on a flat surface. Cut fudge into squares. Store in an airtight container.