In the laser excitation of ultracold atoms to Rydberg states, we observe a dramatic suppression caused by van der Waals interactions. This behavior is interpreted as a local excitation blockade: Rydberg atoms strongly inhibit excitation of their neighbors. We measure suppression, relative to isolated atom excitation, by up to a factor of 6.4. The dependences of this suppression on both laser irradiance and atomic density are in good agreement with a mean-field model. These results are an important step towards using ultracold Rydberg atoms in quantum information processing.