The chiral magnetic effect is the generation of electric current induced by chirality imbalance in the presence of magnetic field. It is a macroscopic manifestation of the quantum anomaly in relativistic field theory of chiral fermions (massless spin $1/2$ particles with a definite projection of spin on momentum) -- a dramatic phenomenon arising from a collective motion of particles and antiparticles in the Dirac sea. The recent discovery of Dirac semimetals with chiral quasi-particles opens a fascinating possibility to study this phenomenon in condensed matter experiments. Here we report on the first observation of chiral magnetic effect through the measurement of magneto-transport in zirconium pentatelluride, ZrTe_5. Our angle-resolved photoemission spectroscopy experiments show that this materials electronic structure is consistent with a 3D Dirac semimetal. We observe a large negative magnetoresistance when magnetic field is parallel with the current. The measured quadratic field dependence of the magnetoconductance is a clear indication of the chiral magnetic effect. The observed phenomenon stems from the effective transmutation of Dirac semimetal into a Weyl semimetal induced by the parallel electric and magnetic fields that represent a topologically nontrivial gauge field background.