Butter a 9x9 in pan and set aside.

In a large bowl combine nuts (if using), chocolate chips, butter, and vanilla extract. Set aside.

In a double boiler combine marshmallows and water. Stir occasionally.

While the marshmallows are melting, in a medium saucepan stir together sugar and evaporated milk. Bring to a slow boil and then turn down heat to low and continue boiling for 6 min. Stir occasionally and keep a close eye on it.

After the 6 minutes pour the boiled milk mixture into the marshmallow mixture and stir to combine. Then pour this mixture over your prepared bowl of chocolate and stir. Stir until the mixture is smooth. This will take a couple of minutes.

Pour the fudge into your prepared pan and let it set in the refrigerator until firm.