Effort is costly: given a choice, we tend to avoid it. However, in many cases, effort adds value to the ensuing rewards. From ants to humans, individuals prefer rewards that had been harder to achieve. This counterintuitive process may promote reward seeking even in resource-poor environments, thus enhancing evolutionary fitness. Despite its ubiquity, the neural mechanisms supporting this behavioural effect are poorly understood. Here we show that effort amplifies the dopamine response to an otherwise identical reward, and this amplification depends on local modulation of dopamine axons by acetylcholine. High-effort rewards evoke rapid acetylcholine release from local interneurons in the nucleus accumbens. Acetylcholine then binds to nicotinic receptors on dopamine axon terminals to augment dopamine release when reward is delivered. Blocking the cholinergic modulation blunts dopamine release selectively in high-effort contexts, impairing effortful behaviour while leaving low-effort reward consumption intact. These results reconcile in vitro studies, which have long demonstrated that acetylcholine can trigger dopamine release directly through dopamine axons, with in vivo studies that failed to observe such modulation, but did not examine high-effort contexts. Our findings uncover a mechanism that drives effortful behaviour through context-dependent local interactions between acetylcholine and dopamine axons.