Preheat oven to 350 degrees.
In a large mixing bowl, combine cake mix and one package of pistachio instant pudding. Add water, sour cream, and eggs, using a mixer, blend ingredients for one minute on high speed.
Butter and lightly flour two round cake pans. Evenly pour the cake into the two pans. Bake for 25-30 minutes.
Using a medium-sized bowl, combine remaining package of pudding mix, add milk and vanilla. Whisk the ingredients together until they’re well blended and it mixture begins to thicken. Using a spatula, fold the whipped topping to the ingredients to gently combine.
Once the cake has cooled completely, coat the first cake with frosting, then add the second cake and apply the frosting to the top and sides. Coat sides of the cake with crushed pistachio and garnish with additional pistachio on top, if desired.