Mix sugar, milk and butter in a 2 quart saucepan. Cook over medium heat until softball stage (drop from tip of spoon into cold water to see if it holds its shape when rolled into a ball). Begin testing after it has boiled for 5 minutes.
Remove from heat. Add peanut butter and vanilla. Beat with spoon until blended and smooth. Place pan in cold water and beat until it begins to thicken. Pour into buttered 8" x 8" dish.