We consider the nonlinear stability of the Kaluza-Klein monopole viewed as the static solution of the five-dimensional vacuum Einstein equations. Using both numerical and analytical methods, we give evidence that the Kaluza-Klein monopole is asymptotically stable within the cohomogeneity-two biaxial Bianchi type-IX ansatz recently introduced by Bizoń, Chmaj, and Schmidt. We also show that for sufficiently large perturbations the Kaluza-Klein monopole loses stability and collapses to a Kaluza-Klein black hole. The relevance of our results for the stability of Bogomol'nyi-Prasad-Sommerfield states in M or string theory is briefly discussed.