We report the first observation of charmed mesons with the ZEUS detect
or at HERA using the decay channel D(+) --> (D-0 --> K(-)pi(+)) pi(+)
(+ c.c.). Clear signals in the mass difference Delta M=M(D)-M(D-0) a
s well as in the M(K pi) distribution at the D-0 mass are found. The e
p cross section for inclusive D(+/-) production with Q(2) < 4 GeV2 in
the gamma p centre-of-mass energy range 115 < W < 275 GeV has been de
termined to be (32+/-7(-7)(+4)) nb in the kinematic region {pr(D) gre
ater than or equal to 1.7 GeV, \pi(D)\ < 1.5}. Extrapolating outside
this region, assuming a mass of the charm quark of 1.5 GeV, we estimat
e the ep charm cross section to be sigma(ep --> c $($) over bar$$ cX)=
(0.45+/-0.11(-0.22)(+0.37)) mu b at root s=296 GeV and [W]=198 GeV. Th
e average gamma p charm cross section sigma(gamma p --> c $($) over ba
r$$ cX) is found to be (6.3+/-2.2(-3.0)(+6.3)) mu b at [W]=163 GeV and
(16.9+/-5.2(-8.5)(+13.9)) mu b at [W]=243 GeV. The increase of the to
tal charm photoproduction cross section by one order of magnitude with
respect to low energy data experiments is well described by QCD NLO c
alculations using singular gluon distributions in the proton.