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Line an 8-inch square baking pan or a 9-inch square baking pan* with aluminum foil or parchment paper, leaving enough overhang on the sides to easily remove the fudge once it has set. Set aside.
Combine 1/2 cup + 1 Tablespoon of sweetened condensed milk (half of the can), chocolate chips, and marshmallow creme in a medium saucepan over medium heat. Stir constantly until the chocolate chips have melted. Once the mixture is smooth, remove from heat and stir in the vanilla and peppermint extracts. Spread chocolate layer into the prepared pan. A small offset spatula is helpful for this. Place in the refrigerator as you make the white chocolate layer.
Wipe the pot clean. (Wash and dry, or just wipe with a paper towel– careful, it’s likely still warm!)
Combine 1/2 cup + 1 Tablespoon of sweetened condensed milk (the rest of the can), white chocolate chips, and marshmallow creme in a medium saucepan over medium heat. Stir constantly until the white chocolate chips have melted. This layer will be a little thinner than the chocolate layer. Once the mixture is smooth, remove from heat and stir in the vanilla, peppermint extract, and 1/3 cup crushed candy canes.
Pour over chocolate layer and spread into an even layer. Sprinkle with extra candy canes, if desired.
Cover with aluminum foil and refrigerate for 4 hours or overnight until completely set. Once set, remove the fudge from the baking pan by lifting out the aluminum foil or parchment paper. Peel away foil and cut into 1-inch squares.
Fudge stays fresh covered at room temperature for 1 week or in the refrigerator for 2-3 weeks. I always stack it in a Tupperware between layers of parchment paper.