We demonstrate optical bistability in a prism-air-graphene-dielectric structure. Under a moderate electric field in the terahertz frequency regime, the third order nonlinear optical conductivity is comparable to the linear conductivity. The nonlinear conductivity enhances the energy of surface plasmon polaritons. Both the energy and frequency of the surface plasmon polaritons depend on the strength of the nonlinear current in the graphene layer. When considering excitation in the Kretschmann configuration, the reflectance as a function of frequency exhibits bistability. The origin of the bistability is the field dependence of the plasmon mode. We have determined the parameter regime for the occurrence of bistability in this structure.