We report the discovery of a transient source in the central regions of galaxy cluster Abell 267. The object, which we call PALS1, was found in a survey aimed at identifying highly-magnified Lyman-break galaxies in the fields of intervening rich clusters. At discovery, the source had U>24.7 (2-sigma; AB), g=21.96, and very blue g-r and r-i colors; i.e., PALS1 was a U-band drop-out, characteristic of star-forming galaxies and quasars at z~3. However, three months later the source had faded by more than three magnitudes. Further observations showed a continued decline in luminosity, to R>26.4 seven months after discovery. Though the apparent brightness is suggestive of a supernova at roughly the cluster redshift, we show that the photometry and light curve argue against any known type of supernova at any redshift. The spectral energy distribution and location near the center of a galaxy cluster are consistent with the hypothesis that PALS1 is a gravitationally-lensed transient at z~3.3. If this interpretation is correct, the source is magnified by a factor of 4-7 and two counterimages are predicted. Our lens model predicts time delays between the three images of 1-10 years and that we have witnessed the final occurrence of the transient. The intense luminosity (M(AB) ~ -23.5 after correcting for lensing) and blue UV continuum (implying T>50,000 K) argue the source may have been a flare resulting from the tidal disruption of a star by a 10^6-10^8 solar-mass black hole. Regardless of its physical nature, PALS1 highlights the importance of monitoring regions of high magnification in galaxy clusters for distant, time-varying phenomena.
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