Arago’s discovery in 1811 of natural optical activity in chiral crystals and Faraday’s discovery in 1846 of magnetically induced optical activity have contributed much to our understanding of the wave nature of light and the electronic properties of molecules. Both effects are manifest as a rotation in the polarization of transmitted light : the former is due to the intrinsic properties of media that lack mirror symmetry, whereas the latter (which occurs in all materials) is due to magnetic-field-induced changes in the optical properties. The apparent similarity of these two effects motivated Pasteur to search in vain for a link between the two phenomena(1). Such a link-which can be regarded as arising either from a magnetically induced change of natural optical activity or from the difference in magnetic optical activity of the two enantiomers of a chiral medium-has been predicted to exist(2-7), although it is expected to be very weak Here we report the experimental observation of this ’magnetochiral’ optical effect and a demonstration of its enantioselectivity. The existence of this effect may be important in the context of fundamental interactions between light and matter, and in molecular spectroscopy.