We report the experimental observation of butterfly bistability in an InGaAs/InP multiple-quantum well waveguide with a distributed feedback grating, under cw operation and at sub-milliwatt input power. Plasma effects on the excitonic optical properties in multiple-quantum well structures are the basis of the observed bistability. Insight provided by a simple coupled-mode description of the device and by many-body theory of the held-matter interaction is used both for device design and for interpretation of the results. In particular, the unconventional shape of the hysteresis is due to increased optical absorption at high injected optical power. (C) 1995 American Institute of Physics.