We present the results of infrared observations of the BL Lacertae object Markarian 501 obtained with the Telescopio Carlos Sanchez of El Observatorio del Teide, Tenerife, Spain. We report the detection of rapid infrared variations. On two nights the K (2.2 micron) magnitude shows variations which a Chi-Squared test establishes have a probability of reality of 99.5% or higher. On two further nights the probability of variation is less than 90% and 95% respectively. The fastest variations are on time scales less than one hour and imply an infrared emitting region of the order of 4 AU in diameter permeated by a magnetic field of the order of 13 G. Control observations of 3C66A show no significant variations on the same night that Markarian 501 showed the highest degree of activity. During the period covered by the observations, photometry showed a decline of 1.1 magnitudes in J; 0.73 magnitudes in H and 0.24 magnitudes in K in one day, these being the largest daily variation ever reported in this object. This was followed by a recovery over three days to a level close to the previous values. The decline was accompanied by large changes in the observed infrared spectrum.