In a large microwave safe bowl, heat chocolate chips and peanut butter for 30 seconds on high. Stir well and then return to the microwave, heating in 15 second bursts. Stir after each trip to the microwave and stop once it stirs smooth.
Add the cereal and carefully stir to coat. You don't want to crush the cereal, but it all should be well coated.
Add powdered sugar to a gallon zipper bag, then add the chocolate coated cereal. Close the bag and shake to coat.
Allow to set completely before serving. Store in an airtight container.