  Using the CLEO detector at the Cornell $e^+e^-$ storage ring, CESR, we study
the two-photon production of $\Lambda \bar{\Lambda}$, making the first
observation of $\gamma \gamma \to \Lambda \bar{\Lambda}$. We present the
cross-section for $ \gamma \gamma \to \Lambda \bar{\Lambda}$ as a function of
the $\gamma \gamma$ center of mass energy and compare it to that predicted by
the quark-diquark model.
