In a large, heavy-bottomed saucepan or Dutch oven, combine the peaches, 1 cup of sugar, water, vanilla extract, and lemon juice. Stir well and bring to a simmer over medium heat.
Drop spoonfuls of the dumpling batter onto the simmering peaches. Cover the saucepan and let it cook for about 20-25 minutes, or until the dumplings are cooked through and no longer doughy.