The quantum Hall effect (QHE) in two-dimensional (2D) electron gases, which is one of the most striking phenomena in condensed matter physics, involves the topologically protected dissipationless charge current flow along the edges of the sample. Integer or fractional electrical conductance are measured in units of $e^2/2pihbar$, which is associated with edge currents of electrons or quasiparticles with fractional charges, respectively. Here we discover a novel type of quantization of the Hall effect in an insulating 2D quantum magnet. In $alpha$-RuCl$_3$ with dominant Kitaev interaction on 2D honeycomb lattice, the application of a parallel magnetic field destroys the long-range magnetic order, leading to a field-induced quantum spin liquid (QSL) ground state with massive entanglement of local spins. In the low-temperature regime of the QSL state, we report that the 2D thermal Hall conductance $kappa_{xy}^{2D}$ reaches a quantum plateau as a function of applied magnetic field. $kappa_{xy}^{2D}/T$ attains a quantization value of $(pi/12)(k_B^2/hbar)$, which is exactly half of $kappa_{xy}^{2D}/T$ in the integer QHE. This half-integer thermal Hall conductance observed in a bulk material is a direct signature of topologically protected chiral edge currents of charge neutral Majorana fermions, particles that are their own antiparticles, which possess half degrees of freedom of conventional fermions. These signatures demonstrate the fractionalization of spins into itinerant Majorana fermions and $Z_2$ fluxes predicted in a Kitaev QSL. Above a critical magnetic field, the quantization disappears and $kappa_{xy}^{2D}/T$ goes to zero rapidly, indicating a topological quantum phase transition between the states with and without chiral Majorana edge modes. Emergent Majorana fermions in a quantum magnet are expected to have a major impact on strongly correlated topological quantum matter.
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