Preheat oven to 350 degrees F. Grease bottom of an 8-inch square baking pan. Line bottom with waxed paper or parchment paper; grease and lightly flour pan.
Remove 2 tsp. zest and squeeze 1/2 cup juice from oranges. In a medium bowl stir together flour, granulated sugar, and baking powder. Add orange zest and juice, milk, butter, egg, and vanilla. Beat with a mixer on low until combined. Beat on medium 1 minute. Spread batter in prepared pan.
Bake 25 minutes or until a toothpick comes out clean. Cool in pan on a wire rack 10 minutes. Remove cake from pan; cool on wire rack. If desired, spread with Butter Frosting or dust with powdered sugar.
In a large mixing bowl beat softened butter with an electric mixer on medium speed until smooth. Gradually add 3/4 cup of powdered sugar, beating well. Slowly beat in 2 tablespoons milk and vanilla. Gradually beat in the additional 2 1/2 cups of powdered sugar. Beat in additional milk until frosting reaches spreading consistency.