We report the first observation of laser seeding of the storage-ring microbunching instability. Above a threshold bunch current, the interaction of the beam and its radiation results in a coherent instability, observed as a series of stochastic bursts of coherent synchrotron radiation (CSR) at terahertz frequencies initiated by fluctuations in the beam density. We have observed that this effect can be seeded by imprinting an initial density modulation on the beam by means of laser "slicing." In such a situation, most of the bursts of CSR become synchronous with the pulses of the modulating laser and their average intensity scales exponentially with the current per bunch. We present detailed experimental observations of the seeding effect and a model of the phenomenon. This seeding mechanism also creates potential applications as a high-power source of CSR at terahertz frequencies.