Cream butter and sugar. Mix in the water and vanilla. Add flour and the ground nuts. Chill 4 hours.
Form dough into long rolls about 1 inch in diameter. Cut into 3-inch lengths, shape into crescents.
Bake on ungreased cookie sheets 15 minutes in a preheated 325° oven. Watch carefully and do not allow crescents to brown. Remove from cookie cheets. Let cool slightly. Roll in powdered sugar.