An impurity-driven magnetic phase transition has been investigated in LaCoO3 at temperatures below that of the thermally induced spin state transition of the Co3+ ion. We have discovered a saturating component of the magnetisation, which we attribute to previously unobserved interactions between magnetic excitons. These conclusions are confirmed by muon spin spectroscopy which indicates an ordering temperature of 50 K in both the transverse and zero-field configurations. Low-energy muon measurements demonstrate that the magnetic behaviour is independent of implantation energy and hence a property of the bulk of the material. The magnetic exciton formation is attributed to the interaction between electrons bound at oxygen vacancies and neighbouring cobalt ions, and is proposed as the precursor to the magneto-electronic phase separation recently observed in doped lanthanum cobaltite.