We observe and characterize intrinsic optical bistability in a dilute Rydberg vapor. The bistability is characterized by sharp jumps between states of low and high Rydberg occupancy with jump-up and -down positions displaying hysteresis depending on the direction in which the control parameter is changed. We find that the shift in frequency of the jump point scales with the fourth power of the principal quantum number. Also, the width of the hysteresis window increases with increasing principal quantum number, before reaching a peak and then closing again. The experimental results are consistent with predictions from a simple theoretical model based on semiclassical Maxwell-Bloch equations including the effects of interaction-induced broadening and level shifts. These results provide insight into the dynamics of driven dissipative systems.