In a large mixing bowl, whisk together warm water, granulated sugar, and active dry yeast. Let sit for 5-10 minutes until frothy.

Add egg, evaporated milk, softened butter, salt, and vanilla extract to the yeast mixture and whisk until well combined.

Gradually add in all-purpose flour, mixing until a soft dough forms. Knead on a floured surface for 10-12 minutes.

Grease a bowl with oil, place dough inside, cover, and allow to rise for 1 to 1.5 hours until doubled in size.

Punch down risen dough, roll out to ¼ inch thickness, and cut into 2-3 inch squares.

Heat vegetable oil to 350°F (175°C) using a thermometer for accuracy.

Fry beignet squares for 1-2 minutes on each side until golden brown.

Transfer cooked beignets to a plate lined with paper towels and dust with powdered sugar while hot.

Serve warm, ideally with coffee or fruit preserves.