The toddler, Aurora Kyle, wandered away with her dog over the weekend.
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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."
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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.
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WPVI-TV contributed to this report.