The existence of bound states of elementary spin waves (magnons) in one-dimensional quantum magnets was predicted almost 80 years ago. Identifying signatures of magnon bound states has so far remained the subject of intense theoretical research, and their detection has proved challenging for experiments. Ultracold atoms offer an ideal setting in which to find such bound states by tracking the spin dynamics with single-spin and single-site resolution following a local excitation. Here we use in situ correlation measurements to observe two-magnon bound states directly in a one-dimensional Heisenberg spin chain comprising ultracold bosonic atoms in an optical lattice. We observe the quantum dynamics of free and bound magnon states through time-resolved measurements of two spin impurities. The increased effective mass of the compound magnon state results in slower spin dynamics as compared to single-magnon excitations. We also determine the decay time of bound magnons, which is probably limited by scattering on thermal fluctuations in the system. Our results provide a new way of studying fundamental properties of quantum magnets and, more generally, properties of interacting impurities in quantum many-body systems.