Toy and teacup dogs are extremely different, though they may be relatively the same size. The term "toy" is used to describe certain breeds — or groups within breeds — that are very small in size, typically under 12 inches (30.48 cm) when fully grown; pugs, Maltese, and chihuahuas are just a few examples of breeds usually recognized as toy breeds. "Teacup" is not an official term, and is often used to describe any dog that is very small in size. These dogs are specifically bred to be as small as possible, and often have extremely delicate bones, respiratory problems, and other health issues.

There is no official size standard for a teacup dog, although the name comes from the idea that the animal is small enough to fit inside a tea cup. The name is generally considered to be a marketing term, and none of the major international dog registries recognizes the group. Toy and teacup dogs may share their small size, especially for the smaller of the toy breeds, but puppies sold as teacups are often those that were born premature, or were bred from two exceptionally small parents. Most reputable breeders do not sell teacup dogs, though they are very popular.

A main difference between toy and teacup dogs is their general health. Toy dog breeds are typically healthy while teacup dog breeds tend not to be. Teacup dogs usually are smaller and frailer than toy dogs, and they characteristically contract illnesses and diseases faster, have more medical complications and are more apt to die younger.

Toy and teacup dogs also differ in their breeding. Teacup dogs are generally bred by mating the runt, or the tiniest and least healthy dog, of one litter with the runt of another. Some backyard breeders and puppy mills breed teacups for the sole purpose of producing the smallest dog possible for the simple fact that they assume women will like the tiny dogs. Unknowing families purchase these teacup dogs because they may seem "cute," but most teacup dogs are unhealthy and are simply a way for the breeder to make money off the runt of the litter.

The American Kennel Club (AKC) in the U.S. has a compilation of all the registered breed types on its website. The site can serve as a good reference tool to examine and compare various dog breeds. A qualified breeder in the U.S. typically raises dogs according to the AKC's standards, usually by breeding two champions to preserve the integrity of the breed.