The production of $\Upsilon$(2S) and $\Upsilon$(3S) mesons in lead-lead (PbPb) and proton-proton (pp) collisions is studied in their dimuon decay channel using the CMS detector at the LHC. The $\Upsilon$(3S) meson is observed for the first time in PbPb collisions, with a significance above five standard deviations. The ratios of yields measured in PbPb and pp collisions are reported for both the $\Upsilon$(2S) and $\Upsilon$(3S) mesons, as functions of transverse momentum and PbPb collision centrality. These ratios, when appropriately scaled, are significantly less than unity, indicating a suppression of $\Upsilon$ yields in PbPb collisions. This suppression increases from peripheral to central PbPb collisions. Furthermore, the suppression is stronger for $\Upsilon$(3S) mesons compared to $\Upsilon$(2S) mesons, extending the pattern of sequential suppression of quarkonium states in nuclear collisions previously seen for the $\psi$/J, $\psi$(2S), $\Upsilon$(1S), and $\Upsilon$(2S) mesons.
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