The Australian study found that dogs were better at following cues to find a hidden treat after they were given oxytocin.
The findings provide the best clues yet on how dogs might have evolved to be humans' best friend, and could help pave the way for breeding dogs that respond even better to human cues, said researcher Jessica Oliva at Monash University.
There is mounting evidence that oxytocin is involved in bonding between humans and dogs, Oliva said.
For example, patting and talking to a dog for just three minutes has been found to increase oxytocin levels in the blood stream of both human and dog, Oliva said.
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In the new study, Oliva and colleagues looked at the impact of oxytocin on dogs' ability to use human cues to pick which of two bowls contained a hidden treat.
Thirty-one male and 31 female pet dogs were tested twice after being given oxytocin or a saline placebo.
Oxytocin was administered to dogs via a nasal spray that ensured it would easily get into the brain. The results showed that animals given oxytocin outperformed those not given the chemical.
Oliva said previous research has shown that dogs are better than their wolf ancestors at using non-verbal human cues like pointing to pick up treats. This is the case even with wolves that are highly socialised and hand-reared by humans.
"So my hypothesis is that over the course of domestication, something happened within the dog's brain that allowed them to understand human social cues," Oliva said.
She suggests that oxytocin enables the bond between dog and human.
The results were published in the journal Animal Cognition.