InclusiveJ/&psgr; production in photon‐photon collisions has been observed by the DELPHI collaboration at LEP II beam energies. A clean signal from the reaction &ggr;&ggr; →J/&psgr; +Xis seen. Number of observed events,N(J/&psgr; → &mgr;+&mgr;−) = 36 ± 7 for the integrated luminosity 617 pb−1, yielding a cross section of &sgr;(J/&psgr; → &mgr;+&mgr;−) = 25.2 ± 10.2 pb. Based on a study of the event shapes of different types of &ggr;&ggr; processes in the PYTHIA program, we conclude that (74±22)&percent; of the observedJ/&psgr; events are due to the ‘resolved’ photons, the dominant contribution of which is evidently a single color‐octet gluon within the photon. © 2002 American Institute of Physics