Prepare an 8x8 inch baking pan by lining it with parchment paper.

Set up a double boiler by placing a heatproof bowl over a pot of simmering water.

Combine the sweetened condensed milk and chocolate chips in the bowl.

Stir the mixture constantly for 3-4 minutes until the chocolate is fully melted and smooth.

Remove the bowl from the heat and stir in the vanilla extract quickly.

Pour the mixture into the prepared pan and spread it into an even layer.

Refrigerate the fudge for at least 2 hours or until it is firm to the touch.

Lift the fudge out of the pan and cut it into small squares using a sharp knife.