We report the observation of ϒ(2S)→γη_{b}(1S) decay based on an analysis of the inclusive photon spectrum of 24.7 fb^{-1} of e^{+}e^{-} collisions at the ϒ(2S) center-of-mass energy collected with the Belle detector at the KEKB asymmetric-energy e^{+}e^{-} collider. We measure a branching fraction of B[ϒ(2S)→γη_{b}(1S)]=(6.1_{-0.7-0.6}^{+0.6+0.9})×10^{-4} and derive an η_{b}(1S) mass of 9394.8_{-3.1-2.7}^{+2.7+4.5} MeV/c^{2}, where the uncertainties are statistical and systematic, respectively. The significance of our measurement is greater than 7 standard deviations, constituting the first observation of this decay mode.