We report the first observation of the rare eta->e+e-e+e- decay based on 1.7 fb^{-1} collected by the KLOE experiment at the DAFNE phi-factory. The selection of the e+e-e+e- final state is fully inclusive of radiation. We have identified 362 +- 29 events resulting in a branching ratio of (2.4 +- 0.2_stat+bckg +- 0.1_syst) x 10^{-5}.
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