Place cranberries, water and sugar in a saucepan set over medium-high heat. Stir to dissolve sugar and simmer until berries begin to pop, about 5 to 7 minutes. Do not allow to boil.
Remove from heat and stir in vanilla extract. Allow to cool slightly.
With a hand blender, blender or food processor, puree until smooth, about 1 minute. Pass mixture through a fine mesh strainer and discard solids. Transfer puree to a glass container.
Cover and keep chilled.