Vagus nerve stimulation (VNS) is a novel therapeutic option to treat a broad and rapidly expanding set of neurologic conditions. While classically used to treat epilepsy and depression, more recently VNS has received FDA approval as a therapeutic option for stroke rehabilitation and is under preclinical and clinical investigation for other disorders. Despite benefits across a diverse range of neurological disorders, the mechanism for how VNS influences central nervous system circuitry is not well described. A deeper understanding of the influence of VNS on neural circuits and activity is needed to optimize the use of VNS therapy. To define the complex dynamics between VNS, neuronal activity, plasticity, and behavior, we performed chronic VNS in mice during the learning of a dexterous motor task, and leveraged genetic tools to perform optogenetic circuit dissection and longitudinal in vivo imaging calcium activity in cortical neurons. We find VNS has the most robust effect on motor learning when paired with successful movement outcome, while randomized stimulation impairs learning, consistent with VNS serving as a reinforcement cue. In motor cortex, VNS paired with movement outcome selectively modulates neurons that are representing outcome, but not other movement-related neurons. Finally, cholinergic signaling from basal forebrain is required both for VNS-driven improvements in motor learning and the effects on neural activity in M1. This suggests that the effect of VNS on motor learning is mediated by cholinergic signaling, and also presents a novel role for cholinergic signaling in endogenous motor learning. These data imply that VNS therapy may be mediated by augmenting reinforcement cues with precisely-timed cholinergic neuronal activity, presenting strategies for optimizing the use of VNS to treat neurologic conditions.