We report the first observation of Y(2S) → ηY(1S), with a branching fraction Β = (2.1 +0.7 -0.6 (stat) ± 0.3(syst)) X 10 -4 and a statistical significance 5.3σ. Data were acquired with the CLEO III detector at the CESR e + e - symmetric collider. This is the first process observed involving a b-quark spin flip. For related transitions, 90% confidence limits in units of 10 -4 are Β(Y(2S) → π 0 Y(1S)) < 1.8, Β(Y(3S) → ηY(1S)) < 1.8, B(Y(3S) →π 0 Y(1S)) < 0.7, and Β(Y(3S) → π 0 Y(2S)) < 5.1.