<p>Phenotypic diversity in genetically homogenous populations has increasingly been recognized as potentially adaptive even under constant conditions. The origins of adaptive differentiation during major evolutionary transitions, such as the evolution of multicellularity and eusociality, are generally thought to arise from pre-existing stochastic and plastic phenotypic heterogeneity. Here, we characterize phenotypic diversity in isogenic populations of experimentally-evolved multicellular yeast, <i>Saccharomyces cerevisiae</i>. Our results show support for a bistable system maintained across different growth conditions, consisting of two distinct morphotypes: large multicellular clusters and smaller ancestral-like clusters consisting of one to a few cells. This bistable system arises as a pleiotropic consequence of a loss-of-function mutation in ACE2 that generates the selected large multicellular clusters concomitantly with the metabolically distinct alternative small clusters phenotype. Time-course assays and mathematical modeling indicate that small clusters phenotype arise directly from the growth of derived multicellular phenotypic individuals, consistent with stochastic phenotypic switching. Furthermore, we found significant differences in gene expression between the two different morphotypes, which cannot be readily explained by microenvironmental variation and instead suggest that the morphotypes occupy distinct growth states. Our study offers insights into how stochastic phenotypic switching can influence evolution by maintaining biological diversity in nascent multicellularity.</p>