Preheat the oven to 350 degrees F.
To make a caramel: In a small saucepan, combine 1 1/2 cups of the sugar and the water and cook over low heat, do not stir, until it turns into caramel, about 15 to 20 minutes. Immediately pour caramel into 9-inch baking pan to about 1/4-inch deep.
Split open vanilla bean, using back of knife scrape out the inside seeds. In a medium bowl, mix together the milk, eggs, remaining 1 1/2 cups sugar, and the vanilla seeds. Strain through a fine sieve and pour on top of caramel in the pan. Place pan in a roasting pan half way filled with water. Bake until the cream is set and does not move when shaken, about 40 minutes. Let set in the refrigerator overnight and serve by turning the creme caramel upside down onto a plate, allowing the caramel to coat it.
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