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Both options start with declaring war on them.
For the first (lesser) option then; after conquering their last (Capitol) city you are given the option to Vassalize them after the battle on the settlement decision screen. You can chose this as it will make them a "Puppet State" of yours on the H.R.E screen. They will always vote with/for you. But doing it this way can cause some serious diplomatic problems as it tends not to reset any of the vassal factions' other current wars or diplomatic status. This can create situations where your new puppet state is still at war with your other allies and may never ask for peace.
The other (better) option is to keep that settlement as yours for a turn or two. Once the settlement is yours a button on the lower left (when you have settlement selected) will show up giving you to option to "Release buffer state". If you do it this way then they will re-emerge as a faction but totally subservient to you. They will be your puppet state and will seek to mirror every treaty and trade deal that you make henceforth.