In the saucepan, combine milk, water, butter, and sugar, salt, and vanilla. Heat over medium heat until continue stirring until the butter melts and the mixture comes to a boil.
Remove from heat and add the flour and baking powder all at once immediately. Stir vigorously with a spatula until a dough forms and pulls away from the sides of the pan. A ball should form.
Transfer the dough to a pastry piping bag fitted with a large star tip.
Heat about 2-inches of vegetable oil over medium heat in a large pot or deep fryer to 375°F (190°C).
Pipe 4-5 inch strips of dough directly into the hot oil using a sharp knife or scissors to cut the dough as it extrudes. Cook only 3-4 churros at a time.
Fry the churros for 2-3 minutes per side, or until golden brown.
Remove the churros from the oil with a slotted spoon or tongs and drain on paper towels. Repeat until all batter has been used up.
In a large bowl, combine the remaining 1/2 cup of sugar with the cinnamon, then toss the churros in this mixture while they’re still warm for maximum coating.