Beat butter at medium speed with an electric mixer until creamy. Add 1 cup powdered sugar, beating until light and fluffy.
Add egg, lemon zest, and vanilla; beat until blended. Gradually add flour, beating until blended. Stir in cherries.
Wrap dough in plastic wrap, and chill 2 hours.
Preheat oven to 375°. Shape dough into 30 (5- x ½-inch) ropes. Place 2 inches apart on ungreased baking sheets; bend over tops of ropes to look like candy canes.
Bake for 10 to 12 minutes or until edges of cookies begin to brown. Cool on baking sheets 2 minutes. Transfer to wire racks, and cool completely (about 20 minutes.) Decorate candy cane cookies with icing.
*I used Wilton Cookie Icing but you can make your own. Whisk together 3 tablespoons cherry juice, 1 ½ cups powdered sugar, and ½ teaspoon red liquid food coloring in a small bowl until smooth.