Degenerate plasmas, in which quantum effects dictate the behavior of free electrons, are ubiquitous on earth and throughout space. Transitions between bound and free electron states determine basic plasma properties, yet the effects of degeneracy on these transitions have only been theorized. Here, we use an x-ray free electron laser to create and characterize a degenerate plasma. We observe a core electron fluorescence spectrum that cannot be reproduced by models that ignore free electron degeneracy. We show that degeneracy acts to restrict the available electron energy states, thereby slowing the rate of transitions to and from the continuum. We couple degeneracy and bound electron dynamics in an existing collisional-radiative code, which agrees well with observations. The impact of the shape of the cross section, and hence the magnitude of the correction due to degeneracy, is also discussed. This study shows that degeneracy in plasmas can significantly influence experimental observables such as the emission spectra, and that these effects can be included parametrically in well-established atomic physics codes. This work narrows the gap in understanding between the condensed-matter and plasma phases, which coexist in myriad scenarios.