Heat olive oil in a large pot over medium heat. Sauté chopped onion for 2-3 minutes until soft, then add minced garlic and ground beef. Cook until browned, about 5-7 minutes.

Stir in diced tomatoes, tomato sauce, and water, then add bay leaves, dried basil, granulated sugar, Italian seasoning, and salt. Bring to a boil, reduce heat, and simmer for 1-2 hours until thickened.

In a mixing bowl, combine ricotta cheese, grated mozzarella, and grated parmesan. Stir in chopped basil and parsley, along with salt and black pepper until smooth.

Bring a large pot of salted water to a boil. Add lasagna noodles and cook for about 7 minutes until al dente. Drain and rinse with cold water to stop cooking.

Spread ½ cup of meat sauce at the bottom of a greased 9x13 inch baking dish. Layer noodles over the sauce, then half of the cheese filling, and a third of the remaining meat sauce. Repeat layers, finishing with noodles on top and remaining meat sauce. Sprinkle with remaining mozzarella.

Preheat oven to 375°F (190°C). Cover lasagna with greased foil and bake for 45 minutes. Remove foil and bake an additional 15 minutes until golden brown. Let rest for 20-30 minutes before slicing.