Puree the diced watermelon in a blender until smooth. Strain through a fine-mesh sieve to remove excess pulp if desired.
Pour the watermelon puree into a saucepan over medium heat. Add the sugar and lemon juice, stirring well. Bring the mixture to a simmer.
Continue simmering for 30-35 minutes, stirring occasionally. If using cornstarch, mix it with a tablespoon of water and add it in the last 10 minutes. The jam will thicken as it reduces.
Once thickened, remove from heat and stir in vanilla extract. Let cool completely before transferring to a sterilized jar. Store in the refrigerator for up to 3 weeks.
