We have discovered a new Galactic satellite galaxy in the constellation of Sagittarius. The Sagittarius dwarf galaxy is the nearest galaxy known, subtends an angle of $> 10$ degrees on the sky, lies at a distance of $24 \kpc$ from the Sun, $\sim 16 \kpc$ from the centre of the Milky Way. Itis comparable in size and luminosity to the largest dwarf spheroidal, has a well populated red horizontal branch with a blue HB extension; a substantial carbon star population; and a strong intermediate age stellar component with evidence of a metallicity spread. Isodensity maps show it to be markedly elongated along a direction pointing towards the Galactic centre and suggest that it has been tidally distorted. The close proximity to the Galactic centre, the morphological appearance and the radial velocity of 140 km/s indicate that this system must have undergone at most very few close orbital encounters with the Milky Way. It is currently undergoing strong tidal disruption prior to being integrated into the Galaxy. Probably all of the four globular clusters, M54, Arp 2, Ter 7 and Ter 8, are associated with the Sagittarius dwarf galaxy, and will probably share the fate of their progenitor.

MNRAS in press, 22pp uuencoded PS file, 26 printed figures available on request from gil@ast.cam.ac.uk