Impairments in somatosensory function are a common and often debilitating consequence of neurological injury, with few effective interventions. Building on success in rehabilitation for motor dysfunction, the delivery of vagus nerve stimulation (VNS) combined with tactile rehabilitation has emerged as a potential approach to enhance recovery of somatosensation. In order to maximize the effectiveness of VNS therapy and promote translation to clinical implementation, we sought to optimize the stimulation paradigm and identify neural mechanisms that underlie VNS-dependent recovery. To do so, we characterized the effect of tactile rehabilitation combined with VNS across a range of stimulation intensities on recovery of somatosensory function in a rat model of chronic sensory loss in the forelimb. Consistent with previous studies in other applications, we find that moderate intensity VNS yields the most effective restoration of somatosensation, and both lower and higher VNS intensities fail to enhance recovery compared to rehabilitation without VNS. We next used the optimized, moderate intensity to evaluate the mechanisms that underlie recovery. We find that moderate intensity VNS enhances transcription of Arc, a canonical mediator of synaptic plasticity, in the cortex, and that transcript levels were correlated with the degree of somatosensory recovery. Moreover, we observe that blocking plasticity by depleting acetylcholine in the cortex prevents the VNS-dependent enhancement of somatosensory recovery. Collectively, these findings identify neural mechanisms that subserve VNS-dependent somatosensation recovery and provide a basis for selecting optimal stimulation parameters in order to facilitate translation of this potential intervention.