Place the sugar and water into a 1-quart saucepan over medium-high heat (375°F).
Bring the mixture to a boil, whisking until the sugar has dissolved. It's important that you don't leave the sugar unattended as it can burn very easily.
Continue cooking the sugar, stirring occasionally, until it turns from deep gold to light brown, then immediately remove the pan from the heat.
Quickly add the butter, whisk until melted, then slowly whisk in the cream and vanilla extract until smooth.
Transfer the warm caramel sauce to a glass jar. Allow to cool to room temperature, then cover and refrigerate for up to 2 weeks.
Notes
To serve:
The sauce does harden slightly in the refrigerator, so be sure to take it out 30 to 45 minutes before serving, or spoon a little into a separate bowl and microwave for a few seconds to bring it back to a pourable consistency.