Preheat the air fryer: Set it to 350°F (175°C) for about 3 minutes. Lightly spray or brush the basket with oil to prevent sticking.
Prepare the cinnamon sugar: In a shallow bowl, mix the sugar and cinnamon until evenly combined. Set aside.
Melt the butter: Stir in the vanilla extract if using. Keep it in a small bowl for brushing or dipping.
Cut the dough: Open the biscuit can and separate the biscuits. Cut each biscuit into 4 equal pieces and gently roll each piece into a smooth ball. Aim for uniform size so they cook evenly.
Arrange in the basket: Place donut holes in a single layer in the air fryer basket, leaving a little space between each. Work in batches if needed. Do not overcrowd.
Air fry: Cook for 5–7 minutes, shaking the basket halfway through. They’re done when golden brown and puffed with a lightly crisp exterior.
Coat in butter and cinnamon sugar: While still warm, lightly brush or quickly dip each donut hole in the melted butter, then roll in the cinnamon sugar until coated. For a lighter coating, brush instead of dipping.
Serve: Enjoy immediately while warm. Add a drizzle of glaze or serve with a dipping sauce if you like.