In a large microwave safe bowl, heat marshmallows for about 1 1/2 minutes on high until they are just beginning to melt. Mix them together. Add the water and vanilla. Mix again.

Add about half of the powdered sugar and mix well. Don’t worry about clumps of sugar, they will knead out later. Continue to add sugar until you can no longer mix it with a wooden spoon.

Generously grease your counter with butter and butter your hands. Dump out the mixture onto the counter. Knead in the remaining powdered sugar until you have a soft and smooth dough. You can use it immediately, but it is helpful wrap in plastic wrap and refrigerate it until it firms up a bit. Let it come to room temperature before using.