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Combine vinegar, water, sugar, garlic, bay leaf, thyme, salt and peppercorns in a small saucepan. Bring to a boil over high heat, stirring until the sugar and salt are dissolved.
Meanwhile, place onion in a quart-size mason jar.
Pour the pickling liquid over the onion in the jar. Press the onion with the back of a wooden spoon to fully submerge it in the pickling liquid.
Let stand at room temperature for 30 minutes. Seal the lid. Refrigerate for at least 3 hours or up to 1 month.