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Place diced peaches, sugar, lemon juice, vanilla, and water in a medium saucepan; bring to a boil. Reduce heat slightly and cook for 3 minutes, stirring constantly.
Sprinkle in the fruit pectin, stirring until dissolved and continuing to boil for 1 minute. Reduce heat to low and stir for 1 more minute.
Mash the mixture with a potato masher, or handheld immersion blender, until desired consistency is reached.
Ladle the jam into 8 ounce glass canning jars, leaving a ½-inch clearance from the top.
Allow to cool for 1 hour. Seal with the lid and place in the refrigerator overnight to solidify.