Neutron diffraction, magnetization, resistivity, and heat capacity measurements on the 6H-perovskite Ba3BiRu2O9 reveal simultaneous magnetic and structural dimerization driven by strong magnetoelastic coupling. An isostructural but strongly displacive first-order transition on cooling through T*=176 K is associated with a change in the nature of direct Ru-Ru bonds within Ru2O9 face-sharing octahedra. Above T*, Ba3BiRu2O9 is an S=1 magnetic dimer system with intradimer exchange interactions J0/kB=320 K and interdimer exchange interactions J/kB=-160 K. Below T*, a spin-gapped state emerges with Deltaapprox220 K. Ab initio calculations confirm antiferromagnetic exchange within dimers, but the transition is not accompanied by long range-magnetic order.