Preheat the oven to 350°F (175°C) and prepare a cake pan with parchment paper.
Add the softened butter to a mixing bowl and beat until smooth and creamy.
Add the granulated sugar and beat until light and fluffy.
Add the eggs and mix until well incorporated.
Add the fresh key lime zest.
Add the fresh key lime juice and mix until combined.
In a separate bowl, whisk together the all-purpose flour, baking powder, baking soda, and salt.
Gradually add the dry ingredients to the wet mixture.
Mix until the batter is smooth and evenly combined, without overmixing.
Transfer the batter to the prepared cake pan and spread it evenly.
Bake at 350°F (175°C) for 35–45 minutes, or until a toothpick inserted into the center comes out clean.
Remove the cake from the oven and allow it to cool completely before frosting.
Prepare the Cream Cheese Frosting: Beat the softened cream cheese and butter until smooth, then gradually add the powdered sugar, key lime zest, key lime juice, and vanilla extract. Beat until creamy and smooth.
Spread the cream cheese frosting evenly over the cooled cake.
Cut the cake into slices and serve.