Over the last two decades increasing evidence for an acute sensitivity to human gestures and attentional states in domestic dogs has led to a burgeoning of research into the social cognition of this highly familiar yet previously under-studied animal. Dogs (Canis lupus familiaris) have been shown to be more successful than their closest relative (and wild progenitor) the wolf, and than man's closest relative, the chimpanzee, on tests of sensitivity to human social cues, such as following points to a container holding hidden food. The “Domestication Hypothesis” asserts that during domestication dogs evolved an inherent sensitivity to human gestures that their non-domesticated counterparts do not share. According to this view, sensitivity to human cues is present in dogs at an early age and shows little evidence of acquisition during ontogeny. A closer look at the findings of research on canine domestication, socialization, and conditioning, brings the assumptions of this hypothesis into question. We propose the Two Stage Hypothesis, according to which the sensitivity of an individual animal to human actions depends on acceptance of humans as social companions, and conditioning to follow human limbs. This offers a more parsimonious explanation for the domestic dog's sensitivity to human gestures, without requiring the use of additional mechanisms. We outline how tests of this new hypothesis open directions for future study that offer promise of a deeper understanding of mankind's oldest companion.