interactions within a nearly linear medium. To create and manipulate nonclassical states of light, however, one requires a strong, nonlinear interaction at the single photon level. One approach to generate suitable interactions is to couple photons to atoms, as in the strong coupling regime of cavity QED systems. In these systems, however, one only indirectly controls the quantum state of the light by manipulating the atoms. A direct photon-photon interaction occurs in so-called Kerr media, which typically induce only weak nonlinearity at the cost of significant loss. So far, it has not been possible to reach the single-photon Kerr regime, where the interaction strength between individual photons exceeds the loss rate. Here, using a 3D circuit QED architecture, we engineer an artificial Kerr medium which enters this regime and allows the observation of new quantum effects. We realize a Gedankenexperiment proposed by Yurke and Stoler, in which the collapse and revival of a coherent state can be observed. This time evolution is a consequence of the quantization of the light field in the cavity and the nonlinear interaction between individual photons. During this evolution non-classical superpositions of coherent states, i.e. multi-component Schroedinger cat states, are formed. We visualize this evolution by measuring the Husimi Q-function and confirm the non-classical properties of these transient states by Wigner tomography. The single-photon Kerr effect could be employed in QND measurement of photons, single photon generation, autonomous quantum feedback schemes and quantum logic operations.