Altered interaction between striatonigral dopaminergic (DA) inputs and local acetylcholine (ACh) in striatum has long been hypothesized to play a central role in the pathophysiology of dystonia and dyskinesia. Indeed, previous research using several genetic mouse models of human isolated dystonia identified a shared endophenotype with paradoxical excitation of striatal cholinergic interneuron (ChIs) activity in response to activation of dopamine D2 receptors (D2R). These mouse models lack a dystonic motor phenotype, which leaves a critical gap in comprehending the role of DA and ACh transmission in the manifestations of dystonia. To tackle this question, we used a combination of ex vivo slice physiology and in vivo monitoring of striatal ACh dynamics in the inducible, phenotypically penetrant, transgenic mouse model of paroxysmal non-kinesiogenic dyskinesia (PNKD), an animal with both dystonic and dyskinetic features. We found that, similarly to genetic models of isolated dystonia, the PNKD mouse displays D2R-induced paradoxical excitation of ChI firing in ex vivo striatal brain slices. In vivo, caffeine triggers dystonic symptoms while reversing the D2R-mediated excitation of ChIs and desynchronizing ACh release in PNKD mice. In WT littermate controls, caffeine stimulates spontaneous locomotion through a similar but reversed mechanism involving an excitatory switch of the D2R control of ChI activity, associated with enhanced synchronization of ACh release. These observations suggest that the “paradoxical excitation” of cholinergic interneurons described in isolated dystonia models could represent a compensatory or protective mechanism that prevents manifestation of movement abnormalities and that phenotypic dystonia is possible only when this is absent. These findings also suggest that D2Rs may play an important role in synchronizing the ChI network leading to rhythmic ACh release during heightened movement states. Dysfunction of this interaction and corresponding desynchrony of ACh release may contribute to aberrant movements.