Place the marshmallows, shortening, and water into a large microwave-safe bowl and microwave for 25 seconds, and stir.
Repeat 4 times more stirring between each interval or until the mixture is melted.
Knead by hand: To knead by hand without a mixer you will need extra shortening to keep your hands greased during kneading. Add 3/4 of the icing sugar to the melted marshmallow mixture and mix together using a spatula. Then transfer the mixture onto a greased working surface, add the remaining icing sugar one cup at a time and knead until the dough is smooth. Keep your hands greased to prevent the fondant from sticking.
Mixer method: Transfer the marshmallow mixture into a bowl of a stand mixer, and attach the hook attachment that's used for dough.
With the mixer speed on low speed, add one cup at a time of the icing sugar until the fondant dough comes together. The dough should not be sticky and will resemble the consistency of play dough.
If the dough is too stiff for your machine, grease your hands with some shortening, pull it out, and knead on a working surface as you would for regular dough.
Divide the dough and add a few drops of your desired color and continue to knead until the dough reaches your color.
The fondant is ready to be rolled and used to decorate your cake.
To use the fondant at a later time, wrap it in plastic wrap and store it in an air-tight container.
Before working with fondant, apply some shortening to the working surface and your hand to prevent any sticking.
Enjoy your homemade marshmallow fondant.