In a saucepan, stir together water and sugar until the sugar has dissolved and come to a boil. Stir in the cranberries, jalapeno peppers and lemon juice; return the mixture to a boil. Reduce heat and simmer gently for 10 minutes; stirring occasionally.
Stir lemon juice and sherry into the mixture until blended. Remove the pan from heat and allow the mixture to cool completely at room temperature. Refrigerate the cooled mixture in a glass container with lid until you are ready to serve.