Dissolve 2 ½ teaspoons of active dry yeast in 2 tablespoons of warm water, let it stand for 5 minutes until frothy.

In a large bowl, combine the yeast mixture, ¼ cup sugar, 1 cup milk, 1 egg, 1 tablespoon vanilla, and ½ teaspoon salt. Gradually add 3 ½ cups flour until a shaggy dough forms. Mix in 3 tablespoons softened butter.

Knead the dough on a floured surface for 6 to 8 minutes until smooth and elastic.

Shape the dough into a ball, place in a greased bowl, cover, and let rise in a warm spot for 1 to 2 hours.

Punch down the risen dough, roll out to ¼ inch thick, cut into 2-inch squares, and let rest for 30 minutes.

Heat vegetable oil to 350°F. Fry dough squares in batches for 1 to 2 minutes on each side until golden brown.

Drain beignets on paper towels and dust with powdered sugar while still warm.