Striatal dopamine and acetylcholine are essential for the selection and reinforcement of motor actions and decision-making1. In vitro studies have revealed an intrastriatal circuit in which acetylcholine, released by cholinergic interneurons (CINs), drives the release of dopamine, and dopamine, in turn, inhibits the activity of CINs through dopamine D2 receptors (D2Rs). Whether and how this circuit contributes to striatal function in vivo is largely unknown. Here, to define the role of this circuit in a living system, we monitored acetylcholine and dopamine signals in the ventrolateral striatum of mice performing a reward-based decision-making task. We establish that dopamine and acetylcholine exhibit multiphasic and anticorrelated transients that are modulated by decision history and reward outcome. Dopamine dynamics and reward encoding do not require the release of acetylcholine by CINs. However, dopamine inhibits acetylcholine transients in a D2R-dependent manner, and loss of this regulation impairs decision-making. To determine how other striatal inputs shape acetylcholine signals, we assessed the contribution of cortical and thalamic projections, and found that glutamate release from both sources is required for acetylcholine release. Altogether, we uncover a dynamic relationship between dopamine and acetylcholine during decision-making, and reveal multiple modes of CIN regulation. These findings deepen our understanding of the neurochemical basis of decision-making and behaviour.