Within Earth’s climate system the ocean, cryosphere and vegetation exhibit hysteresis behaviour such that their state depends on their past and not merely on their current boundary conditions. The atmosphere’s fast mixing time scales were thought to inhibit the necessary memory effect for such multistability. Here we show that moisture accumulation within the atmospheric column generates hysteresis in monsoon circulation independent of oceanic heat storage and yields two stable atmospheric states for the same boundary conditions. Hysteresis is shown in observational data, reproduced in a general circulation model where it increases with decreasing oceanic memory and then reproduced in a mathematical formulation of the moisture-advection feedback. Thus moisture accumulation can generate bistability through an atmospheric memory that carries information across time scales much longer than those typical for mixing. This has implications for the future evolution of monsoon rainfall that is crucial for the agricultural productivity currently feeding more than two billion people.