The toddler, Aurora Kyle, wandered away with her dog over the weekend.
Reports state that she spent 15 hours in the woods without food and water, but the dog, a blue heeler named Max, stayed by her side the entire time.
"I held him and we slept together. I had a good sleep with Max," Aurora told her grandmother.
Aurora and Max were found after the 3-year-old responded to shouts from her grandmother.
"When I heard her yell 'Grammy' I knew it was her," Leisa Marie Bennett, Aurora's grandmother, told Australian news service ABC. "I shot up the mountain -- and when I got to the top, the dog came to me and led me straight to her."
Queensland Police Service took to Facebook to declare Max as an honorary police dog for keeping his tiny human safe, and for being such a good boy.
Click here for more stories, photos, and video on pets and animals.
WPVI-TV contributed to this report.