In a medium saucepan, combine the sugar, water and vanilla bean pod and seeds.
Bring to a simmer over medium high heat, whisking occasionally until the sugar is completely dissolved. Be sure not to let it get to a full boil.
After the liquid has reached a simmer, reduce heat to low and gently simmer for about 20 minutes. You don't want it to be too hot or your syrup could turn into candy!
After 20 minutes, remove from heat and add the vanilla extract.
Strain the liquid through a fine mesh sieve, reserving the vanilla bean pod to make vanilla sugar* if desired.
Allow to cool and then transfer to a storage container or bottle.
Store in the refrigerator for up to two weeks.
*If making vanilla sugar, save the vanilla bean pod after you strain the syrup. Leave it out to dry on a wire rack for a day or two, then add it to a container and fill with granulated sugar. The longer it sits, the more fragrant the sugar will be.