A new character in Fable 2 is the hero's faithful dog, who adds a little more dimension to the game. In addition to simple companionship, the dog can help out in combat and his sense of smell helps to find items and treasure. For this reason, some quests cannot be completed without the dog's help.

The dog has different types of barks to alert you to different events in the game. When he whimpers, he's been injured in combat and needs to be healed with the Heal expression. When enemies are nearby, he'll growl. A sharp yelp notifies you that the dog has found treasure. An icon above the dog's head will tell you why he's barking. A chest means that there is a treasure chest nearby. A shovel means that he has found a dig spot. Just like with your character, your dog will also change in appearance based on your actions, with his coat becoming darker for more evil actions and lighter for more good actions.

Like most dogs, the hero's canine companion can be taught new tricks. These can be found in "Dog Tricks!" books and range from teaching him to do backflips to urinating on specific targets. There are about ten books in all. The dog's combat skills and the damage he inflicts can also be improved by finding the four "Dogs of War" books in the game. Improve the dog's treasure hunting skills with the four "Treasure Hunting" books. These allow the dog to sniff out the better hidden dig spots.