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Isolation of a single atomic particle and monitoring its resonance fluorescence is a powerful tool for studies of quantum effects in radiation-matter interactions. We present observations of quantum dynamics of an isolated neutral atom stored in a magneto-optical trap. By means of photon correlations in the atom's resonance fluorescence we demonstrate the well-known phenomenon of photon antibunching which corresponds to transient Rabi oscillations in the atom. Through polarization-sensitive photon correlations, we show a novel example of resolved quantum fluctuations: spontaneous magnetic orientation of an atom. These effects can only be observed with a single atom.