Step 1: Preheat oven to 350°F (175°C). Grease and flour two 9-inch round cake pans.
Step 2: In a large bowl, cream together 1/2 cup butter, 1 cup peanut butter, and sugar until light and fluffy.
Step 3: Beat in eggs one at a time, then stir in vanilla extract.
Step 4: In another bowl, whisk together flour, baking powder, baking soda, and salt.
Step 5: Alternately add flour mixture and 1 cup milk to the butter mixture, beginning and ending with flour.
Step 6: Divide batter evenly between prepared pans. Bake for 25-30 minutes until a toothpick inserted comes out clean.
Step 7: Cool cakes in pans for 10 minutes, then remove to wire racks to cool completely.
Step 8: For frosting, beat 1/2 cup butter and 1 cup peanut butter until smooth.
Step 9: Gradually add powdered sugar, milk, and vanilla, beating until creamy and spreadable.
Step 10: Frost cooled cake layers, stacking and covering top and sides with frosting.