In a saucepan, combine water, butter, sugar, and salt over medium heat. Stir until the butter melts and the mixture comes to a boil.
Remove the saucepan from the heat and add the flour, baking powder, and vanilla extract. Stir vigorously until the mixture pulls away from the sides of the pan and forms a dough.
Allow the dough to cool slightly, about 5 minutes, then transfer it to a piping bag fitted with a star tip.
Preheat the air fryer to 375°F (190°C).
Pipe small 1-inch long strips of dough onto parchment paper or directly into the air fryer basket, keeping space between each piece.
Lightly spray the churro bites with cooking spray for extra crispiness.
Air fry the churro bites for 10 to 12 minutes or until they are golden brown and crispy, shaking the basket halfway through cooking.
While they cook, mix the granulated sugar and cinnamon in a bowl.
Once cooked, immediately toss the churro bites in the cinnamon-sugar mixture until fully coated.
Serve warm and enjoy with chocolate or caramel sauce for dipping!