Isotopically separated 154Eu has been used in conjunction with sources prepared from neutron irradiation of isotopically separated 153Eu to study the γ-ray spectra and concomitant level structure of 154Gd. Several levels which have been identified as collective levels are found to have two-phonon character. A collective K=2 vibrational state has been proposed at 1531.39 keV and can be described as a coupled (βγ) two-phonon state. Members of the rotational band built on this state have been identified at 1531.39+/-0.07, 1660.94+/-0.07, and 1790.4+/-0.3 keV with spin and parity of 2+, 3+, and 4+, respectively. A possible second band at 1292.7 keV has been found to possess two (β) phonon characteristics. Evidence is found for the breakdown of the simple E2 selection rules for transitions from higher phonon bands.