We demonstrate a collinear acousto-optic modulator in a suspended film of lithium niobate employing a high-confinement, wavelength-scale waveguide. By strongly confining the optical and mechanical waves, this modulator improves by orders of magnitude a figure-of-merit that accounts for both acousto-optic and electro-mechanical efficiency. Our device demonstration marks a significant technological advance in acousto-optics that promises a novel class of compact and low-power frequency shifters, tunable filters, non-magnetic isolators, and beam deflectors.