A fundamental tenet of animal behavior is that decision-making involves multiple ‘controllers.’ Initially, behavior is goal-directed, driven by desired outcomes, shifting later to habitual control, where cues trigger actions independent of motivational state. Clark Hull’s question from 1943 still resonates today: “Is this transition abrupt, or is it gradual and progressive?” Despite a century-long belief in gradual transitions, this question remains unanswered as current methods cannot disambiguate goal-directed versus habitual control in real-time. Here, we introduce a novel ‘volitional engagement’ approach, motivating animals by palatability rather than biological need. Offering less palatable water in the home cage reduced motivation to ‘work’ for plain water in an auditory discrimination task when compared to water-restricted animals. Using quantitative behavior and HMM-GLM modeling, we found that palatability-driven animals learned to discriminate as quickly as water-restricted animals but exhibited state-like fluctuations when responding to the reward-predicting cue---reflecting goal-directed behavior. These fluctuations spontaneously and abruptly ceased after thousands of trials, with animals now always responding to the reward-predicting cue. In line with habitual control, post-transition behavior displayed motor automaticity, enhanced pupillary responses to the stimulus-response contingency, and insensitivity to sensory-specific outcome devaluation. Finally, we focused our neural investigation on the striatum, which has been hypothesized to have a fundamental division of labor between the dorsomedial (DMS, goal-directed controller) and dorsolateral (DLS, habit controller) regions. Bilateral DLS lesions blocked transitions to habitual behavior. Moreover, using dual fiber photometry recordings in the DLS and DMS, we observed an abrupt reduction of outcome-related signaling in the DLS at the precise trial of a habit transition, and a few trials later in the DMS, while cue-related responses were maintained. The striatum thus appeared to dynamically and abruptly shift from being outcome-driven (goal-directed) to stimulus-driven (habitual), suggesting that a higher-level process arbitrates between the two decision modes.