We report the first observation of diffractively produced open charm in 800
-GeV/c pp collisions of the type pp --> pD*X. We measure cross sections of
sigma (diff)(D*+) = (0.185 +/- 0.044 +/- 0.054) mub and sigma (diff)(D*-) =
(0.174 +/- 0.034 +/- 0.029) mub. Our measurements are based on 4.3 X 10(9)
events recorded by FNAL E690 in the fixed-target run of 1991. We compare o
ur results with previous fixed-target charm experiments.