Using a double boiler, heat the sweetened condensed milk, chocolate chips, and peanut butter over medium heat, stirring frequently. You can also use the microwave.
Once the chocolate chips are melted and the chocolate peanut butter mixture is fully combined, stir in vanilla extract to combine fully.
Add in chopped macadamia nuts and mini marshmallows. Stir to combine.
Pour the fudge mixture into a square pan lined with parchment paper or wax paper. If using parchment paper, grease the pan before adding parchment paper.
Sprinkle the reserved chopped macadamia nuts on top of the fudge before it sets.
Using a spatula or the back of a spoon, evenly spread the mixture in the pan being sure that the fudge mixture reaches the edges of the pan.
Put in the refrigerator for 4 hours to set the mixture. Use a sharp knife to cut into small, one-inch squares.
