Nicotine exerts its reinforcing action by stimulating nicotinic acetylcholine receptors (nAChRs) and boosting dopamine (DA) output from the ventral tegmental area (VTA). Recent data have led to a debate about the principal pathway of nicotine action: direct stimulation of the DAergic cells through nAChR activation, or disinhibition mediated through desensitization of nAChRs on GABAergic interneurons. We use a computational model of the VTA circuitry and nAChR function to shed light on this issue. Our model illustrates that the α4β2-containing nAChRs either on DA or GABA cells can mediate the acute effects of nicotine. We account for in vitro as well as in vivo data, and predict the conditions necessary for either direct stimulation or disinhibition to be at the origin of DA activity increases. We propose key experiments to disentangle the contribution of both mechanisms. We show that the rate of endogenous acetylcholine input crucially determines the evoked DA response for both mechanisms. Together our results delineate the mechanisms by which the VTA mediates the acute rewarding properties of nicotine and suggest an acetylcholine dependence hypothesis for nicotine reinforcement.