Intrinsic bistability in active optical compounds doped with rare-earth ions has attracted widespread interest because of its relevance for optical signal switching and routing. In this paper, room temperature strong bistability effect of Ybsensitized Tm upconversion emission is reported in zirconium dioxide nanocrystal host matrix under infrared diode laser irradiation. The distinct optical bistability behavior is simultaneously observed in three emission bands of Tm ion around 480, 650/680 and 800 nm which are assigned to the radiative transitions of 1 G respectively. The bistability loops exhibit uniformly clockwise cycle characterized by a relatively lower trace of emission intensity at decreasing pump power than the trace at increasing pump power. Multiphoton upconversion processes are analyzed to determine the Yb→Tm energy transfer mechanism. Such strong bistability effect is associated with thermally enhanced nonradiative decay and reduced luminescence quantum yield due to the strong pump-induced local thermal loading.