Combine sugar and water in a saucepan. Cook over medium heat, stirring frequently, until mixture boils and sugar dissolves. Cook, stirring frequently, until mixture reaches soft ball stage (240°).
Beat egg whites (at room temperature) until foamy. While beating at medium speed of electric mixer, slowly pour hot syrup in a thin stream over egg whites. Turn mixer to high speed, and continue beating until stiff peaks form and frosting is thick enough to spread. Stir in vanilla; beat until just blended.