Challenging goals can induce harder work but also greater stress, in turn potentially undermining goal achievement. We sought to examine how mental effort and subjective experiences thereof interact as a function of the challenge level and the size of the incentives at stake. Participants performed a task that rewarded individual units of effort investment (correctly performed Stroop trials) but only if they met a threshold number of correct trials within a fixed time interval (challenge level). We varied this challenge level (Study 1, n = 40) and the rewards at stake (Study 2, n = 79) and measured variability in task performance and self-reported affect across task intervals. Greater challenge and higher rewards facilitated greater effort investment but also induced greater stress, whereas higher rewards (and lower challenge) simultaneously induced greater positive affect. Within intervals, we observed an initial speed up then slowdown in performance, which could reflect dynamic reconfiguration of control. Collectively, these findings further our understanding of the influence of task demands and incentives on mental effort exertion and well-being.