Combine sugar and water in a medium saucepan; cook over medium heat or until sugar dissolves, stirring constantly. Remove from heat and cool completely.
Place cranberries in a food processor; process 2 minutes or until finely chopped. Combine sugar mixture, cranberries and vodka. Pour into clean jars and let stand 3 weeks in a cool, dark place, shaking every other day.
Strain the cranberry mixture through a cheesecloth-lined sieve into a bowl and discard solids. Pour liqueur into clean bottles or jars.
Liqueur can be stored refrigerated or at room temperature for up to a year. Makes approximately 4 1/2 cups.