In a large mixing bowl, cream butter.
Add 1/4 c. powdered sugar and peppermint extract and mix until combined.
Mix in flour and peppermint baking chips.
Chill in refrigerator approx. 1 hour.
Roll into 1 inch balls and place 2 inches apart on parchment paper-lined baking sheet.
Bake at 325° for 20-25 minutes or until light golden brown.
Remove from oven and roll in remaining powdered sugar to coat.