Owner Andrew Yewdall let his five-month-old sausage dog out on the balcony of his top-floor flat.
The puppy, named Penny escaped when the wind blew the gate open and she ran down the stairs.
When Mr Yewdall went to let Penny back into the flat, she had gone.
Andrew who lives in Douglas called his father Geoff, and together they went to look for Penny after they saw reports on Facebook that she had been spotted on Lake Road near Tesco.
Mr Yewdall: ‘She’s scared of people, so when a man approached her she jumped over a step and into the river.’
A member of the public called emergency services and fire crew members were at the scene for about an hour and a half but did not see or hear her.
A fire and rescue service spokesman said: ‘At this time we were fearing the worst as the puppy had been missing for a number of hours and had been seen falling into the river which was moving fast with strong currents.
‘The weather was poor and the puppy’s chance of survival was extremely slim.’
Mr Yewdall was told that there was little chance of her surviving.
Mr Yewdall said: ‘I carried on looking up and down the quay for her, hoping I could find her dead or alive.’
The puppy had been in the river for seven hours when Mr Yewdall heard a bark, which he describes to be distinctive to Penny.
Mr Yewdall called the coastguard and crews were dispatched a second time at 7.49pm.
Mr Yewdall said: ‘I didn’t know if I was hearing things, because I had been looking for her for so long, but they sent a rescue team as I had heard her.’
They were met by a small group of people who had been looking for the dog.
The puppy was located on the river bank.
Firefighters accessed the bank using ladders and were able to rescue the puppy, which fire fighters said was very frightened but safe.
Mr Yewdall said: ‘They found her clinging onto the river bank for dear life.’
He added: ‘Chris from Douglas Coastguard played an integral part in finding her.
‘I am so grateful to him, his team, the fire and rescue services and members of the public who helped search for her
‘The fire brigade said it was a miracle that she survived, particularly in such a strong current, and bad weather conditions.
‘There were probably about 10 people from the public who were kind enough to give up their time to look for her.
‘It was eye-opening to see how willing the Manx public were to help.
‘Penny is safe and well, and has fully recovered from the incident.’
The puppy’s owner is considering changing Penny’s name to ‘Lucky’ following her miraculous survival.