In a large saucepan, bring water to a boil. Add pearl onions; boil for 3 minutes. Drain and rinse in cold water; peel.
In a large skillet over medium heat, melt butter. Add onions; cook for 6-8 minutes or until tender, stirring occasionally. Sprinkle with sugar. Cook 18-20 minutes longer or until onions are golden brown, stirring occasionally. Serve with a slotted spoon.