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Wash and peel peaches. (See instructions in this post on how to peel peaches quickly.)
Cut peaches into small pieces. and place into a bowl.
Add lemon juice, vanilla, and sugar.
Cover the bowl of peaches. Refrigerate peaches for 1 hour. This will allow juices in the peaches to release.
Put peaches in a pot and bring peaches to a boil, over medium heat. Once the peaches are boiling reduce heat to a low heat setting. Boil until the syrup reduces and thickens. (Note: it is not advised to use thickening agents, like corn starch, in canning. If you are making this recipe for fresh eating you can cook for only 10 minutes and add corn starch to thicken the juice for a nice sauce consistency. You may also want to add some additional sugar if you don't reduce the syrup through cooking.)
If peach chunks are too large, use a potato matcher to reduce the chunk size.
Taste test and add additional sugar if needed for desired sweetness levels.
Proceed with the steps to can the peach sauce, as defined in the section "How to Can Peach Sauce."