Fractional quantum Hall states embody emblematic instances of strongly correlated topological matter, where the interplay of magnetic fields and interactions gives rise to exotic properties including fractionally charged quasi-particles, long-ranged entanglement, and anyonic exchange statistics. Here, we report on the realization of a fractional quantum Hall (FQH) state with ultra-cold atoms in an optical lattice. The state is a lattice version of a bosonic 𝜈 = 1/2 Laughlin state with two particles on sixteen sites. We observe a suppression of two-body interactions, we find a distinctive vortex structure in the density correlations, and we measure a fractional Hall conductivity of 𝜎H/𝜎0 = 0.6(2) via the bulk response to a magnetic perturbation. Our work provides a starting point for exploring highly entangled topological matter with ultracold atoms.