Hypocretin (orexin) and dynorphin are neuropeptides with opposing actions on motivated behavior. Orexin is implicated in states of arousal and reward, whereas dynorphin is implicated in depressive-like states. We show that, despite their opposing actions, these peptides are packaged in the same synaptic vesicles within the hypothalamus. Disruption of orexin function blunts the rewarding effects of lateral hypothalamic (LH) stimulation, eliminates cocaine-induced impulsivity, and reduces cocaine self-administration. Concomitant disruption of dynorphin function reverses these behavioral changes. We also show that orexin and dynorphin have opposing actions on excitability of ventral tegmental area (VTA) dopamine neurons, a prominent target of orexin-containing neurons, and that intra-VTA orexin antagonism causes decreases in cocaine self-administration and LH self-stimulation that are reversed by dynorphin antagonism. Our findings identify a unique cellular process by which orexin can occlude the reward threshold-elevating effects of coreleased dynorphin and thereby act in a permissive fashion to facilitate reward.