Insert wooden sticks 3/4 of the way into the stem end of each apple. Place apples on a baking paper lined tray.
Put caramels, water and vanilla in a saucepan. Cook over low heat stirring until caramel melts and the mixture is smooth. Dip each apple into the caramel and gently run apples around insides of saucepan to remove some of the excess caramel. Place on the tray and chill until ready to serve.