Reward-motivated behavior is strongly influenced by the learned significance of contextual stimuli in the environment. However, the neural pathways that mediate context-reward relations are not well understood. We have identified a circuit from area CA3 of dorsal hippocampus to ventral tegmental area (VTA) that uses lateral septum (LS) as a relay. Theta frequency stimulation of CA3 excited VTA dopamine (DA) neurons and inhibited non-DA neurons. DA neuron excitation was likely mediated by disinhibition because local antagonism of γ-aminobutyric acid receptors blocked responses to CA3 stimulation. Inactivating components of the CA3-LS-VTA pathway blocked evoked responses in VTA and also reinstatement of cocaine-seeking by contextual stimuli. This transsynaptic link between hippocampus and VTA appears to be an important substrate by which environmental context regulates goal-directed behavior.