Abstract Domestic dogs (Canis familiaris) have been suggested as a natural model for human social cognition, possessing social skills that are in many ways functionally analogous to those of young humans. Researchers have debated the origins of dogs’ human-like social competence and the underlying cognitive mechanisms, but only recently have researchers begun to explore their neurobiological underpinnings. In this review, findings from behavioral studies are integrated with what is known about the biological basis of dogs’ human-directed social competence, with an emphasis on how stress-mediating systems, particularly the hypothalamic-pituitary-adrenal (HPA) axis, interact with oxytocin and underlying neural systems to facilitate dogs’ interspecific social-cognitive abilities. The working model presented in this paper offers a biological explanation for many of the inconsistent findings from past work on social cognition in dogs and generates questions for future research in the field of canine social competence.