Measurements of the $pp to pK^+Lambda$ reaction at $T_p$ = 2.28 GeV have been carried out at COSY-TOF. In addition to the $Lambda p$ FSI and $N^*$ resonance excitation effects a pronounced narrow structure is observed in the Dalitz plot and in its projection on the $pLambda$-invariant mass. The structure appears at the $pp to $N$K^+Sigma$ threshold and is interpreted as $Sigma$N cusp effect. The observed width of 20 MeV/$c^2$ is substantially broader than anticipated from previous inclusive measurements. Angular distributions of this cusp structure are shown to be dissimilar to those in the residual $pK^+Lambda$ channel, but similar to those observed in the $pK^+Sigma^0$ channel.