Coat a 9x9 baking dish with cooking spray or line with parchment paper.
In a medium saucepan, stir together sugar, evaporated milk and butter. Bring to a boil over high heat. Reduce heat to medium and cook, stirring constantly, for 3-4 minutes.
Stir in chocolate chips and marshmallows. Remove from heat and stir until mixture is smooth. Stir in peppermint extract.
Pour into prepared pan and top with crushed candy canes. Let sit for 2-3 hours or until firmly set. After the fudge is set, slice and enjoy.