Thimble, a Jack Russell terrier, disappeared from Louise Phillips' home at Fields Far, in Alkington, near Whitchurch, last September.
She had given up hope of finding her cherished pet until she received a phone call from Liverpool to say Thimble was alive and well.
Now Mrs Phillips is calling on more owners to have their dogs fitted with a microchip tag after the implant proved vital in tracing the missing dog.
Thimble was found on a canal path in Liverpool and a dog warden was able to find Mrs Phillips because of the identity tag inserted under the animal's skin.
'Complicated issues'
Mrs Phillips said the only reason she had Thimble back was because of the microchip.
"She was found by a gentleman and his grandson who spotted her on a towpath in Liverpool," she said.
"Eventually they contacted a dog warden and the warden came out and said 'I'll scan her' and thankfully we had chipped her. That's why we have her back here."
The RSPCA said the discovery proved that spending money on microchipping pets was worth every penny.
A spokeswoman said: "Microchipping is so important and this goes to show it proves its own worth.
"There are all sorts of complicated issues that can arise over ownership, particularly in cases where a family takes in a stray."