The folding dynamics of small proteins are often described in terms of a simple two-state kinetic model. Within this notion, the behavior of individual molecules is expected to be stochastic, with a protein molecule residing in either the unfolded or the folded state for extended periods of time, with intermittent rapid jumps across the free energy barrier. However, a direct observation of this bistable behavior has not been made to date. Rather, previous reports of folding trajectories of individual proteins have shown an unexpected degree of complexity. This raises the question whether the simple kinetic properties derived from classical experiments on large ensembles of molecules are reflected in the folding paths taken by individual proteins. Here we report single-molecule folding/unfolding trajectories observed by fluorescence resonance energy transfer for a protein that meets all criteria of a two state-system. The trajectories, measured on molecules immobilized in lipid vesicles, demonstrate the anticipated bistable behavior, with steplike transitions between folded and unfolded conformations. They further allow us to put an upper bound on the barrier crossing time.