With a Cr:YAG crystal as the intracavity saturable absorber, the passive Q-switching operation of a diode-pumped Nd:Lu0.8Gd0.2VO4 microchip laser was demonstrated. An obvious optical bistable phenomenon was observed, the width of the bistable region was 0.9 W, and the jump power at the turning point was 160 mW. By using a four-level laser model with a saturable absorber, the theoretically calculated results were observed to agree well with the experimental data. To the best of our knowledge, this is the first time that optical bistablility is achieved in Q-switched neodymium-doped solid-state lasers. (C) 2011 The Japan Society of Applied Physics