We report the first observation of the hadronic transition $Upsilon(4S)toetaUpsilon(1S)$, using 496 fb$^{-1}$ data collected at the $Upsilon(4S)$ resonance with the Belle detector at the KEKB asymmetric-energy $e^{+}e^{-}$ collider. We reconstruct the $eta$ meson through its decays to $rho^0gamma$ and to $pi^+pi^-eta$, with $etatogammagamma$. We measure: ${cal B}(Upsilon(4S)toetaUpsilon(1S))=(3.43pm 0.88 {rm(stat.)} pm 0.21 {rm(syst.)})times10^{-5}$, with a significance of 5.7$sigma$.