Nanomechanical oscillators offer numerous advantages for quantum technologies. Their integration with superconducting qubits shows promise for hardware-efficient quantum error-correction protocols involving superpositions of mechanical coherent states. Limitations of this approach include mechanical decoherence processes, particularly two-level system (TLS) defects, which have been widely studied using classical fields and detectors. In this manuscript, we use a superconducting qubit as a quantum sensor to perform phonon number-resolved measurements on a piezoelectrically coupled phononic crystal cavity. This enables a high-resolution study of mechanical dissipation and dephasing in coherent states of variable size (n¯≃1−10\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$\\bar{n}\\simeq 1-10$$\\end{document} phonons). We observe nonexponential relaxation and state size-dependent reduction of the dephasing rate, which we attribute to TLS. Using a numerical model, we reproduce the dissipation signatures (and to a lesser extent, the dephasing signatures) via emission into a small ensemble (N = 5) of rapidly dephasing TLS. Our findings comprise a detailed examination of TLS-induced phonon decoherence in the quantum regime.