Spray a rubber spatula with cooking spray or smear it with some Crisco shortening.
Place the marshmallows and the water in a large microwave-safe bowl. Microwave on HIGH for 1 minute, until the marshmallows are puffy and expanded.
Stir the marshmallows with a rubber spatula until they are melted and smooth. If some marshmallow pieces remain intact, return them to microwave for 30–45 seconds, until the marshmallow mixture is entirely smooth and free of lumps.
Scoop the sugar into the melted marshmallow. Stir slowly with the spatula to form a ball like bread dough.
Spread a little sugar on the counter. Transfer the dough to the counter and knead it until it’s smooth and no longer sticky. Do this for about 5 minutes. (It will be hot at first, so be careful!)
Once the fondant is a smooth ball, it is ready to be used. Use immediately or wrap it well in cling wrap and store in the fridge. You will have to knead it to make it supple again.