We report the first observation of the polarization of $Lambda/bar{Lambda}$ hyperons transverse to its production plane in $e^+e^-$ annihilation. We observe a significant polarization that rises with the fractional energy carried by the hyperon as well as its transverse momentum. To define the production plane, we use the direction of the hyperon momentum together with either the thrust axis in the event or the momentum vector of a hadron in the opposite hemisphere. Furthermore, we investigate the contributions to the hyperon polarization from the feed-down from $Sigma^0/bar{Sigma}^0$ and $Lambda_c^{pm}$ decays. This measurement uses a dataset of 800.4~fb$^{-1}$ collected by the Belle experiment at or near a center-of-mass energy of 10.58 GeV.