1. In large bowl, beat together butter and the granulated sugar on medium-high speed until light and fluffy, about 2 minutes. Add 2 teaspoons water and vanilla extract; beat until combined. On low speed, beat in the flour just until combined and all ingredients are evenly moistened.
2. Fold in nuts. Form into disk; cover with plastic wrap. Refrigerate for 2 to 3 hours.
3. Heat oven to 350 degrees F. Roll dough into balls, using 1 level tablespoon for each. Place on ungreased baking sheets, spacing about 1 inch apart.
4. Bake in 350 degree F oven for 20 minutes or until lightly golden. Let cookies cool slightly on wire rack. Dust with remaining confectioners sugar.