Many dog owners struggle with rehabilitating their overly shy dog.
Even though the struggle will be long there is hope. No matter if the dog has been abused or neglected he/she can be rehabilitated to the point of being in the company of people with minimal stress. Your dog will most likely always be wary of new people, but with time and patience, his/her fear will not turn to aggression. Fear based aggression is the most common form of aggression and must be addressed immediately when any behavioral signs begin to appear.
The reason why a dog is fearful of people is of no importance, as a dog owner you should only be concerned with making your dog comfortable with new people. The most important thing to remember with rehabilitating the shy dog is the NEVER push him/her. Your dog will tell you when it's time for a new person to pet him/her. Many training methods call for the owner feeding the dog a tasty treat while a stranger pets the dog. In my opinion this can cause unnecessary stress on the dog. Associating food with a new person is correct, but forcing the dog to be touched by a new person will cause him/her stress. This can cause the dog to no longer take a treat when he/she sees a new person. The best thing to do is to let the dog decide when he/she is to be petted.
No matter what any dog is afraid of the best thing you can do is to not to address the fear head on. As a handler you should merely associate the fear with something pleasant and to build your dog's confidence. The best confidence exercises are; trick training, working with agility equipment, and fetch. The reasons for these particular exercises are the reaction they get from new people and their handlers. Anytime a dog learns something new he/she feels better about themselves. When you do these activities in public and someone cheers it amplifies tenfold. So the goal is to take a dog someplace where he/she would usually experience stress and have them do something that warrants applause. Do this enough times and they will love going to the veterinarian's office.
Below is a list of recommendations to help rehabilitate a shy dog. But the most important thing when working with a shy dog is to NOT FORCE HIM/HER TO BE PETTED BY A STRANGER until they tell you they are ready!!
Take your shy dog to public places even though he/she will most likely hide behind you. The most important thing to do is to NOT your dog when he/she is cowering. Once your dog looks at a person CLICK and TREAT. The intention here is to simply reward your dog for showing interest in a new person. Make sure you use a high value treat that your dog never gets. (Example: boiled chicken, hot dog, cheese)
Once your dog has crawled out from behind you consistently, then it is time for new people to start treating him/her. First, show your dog the treat, give it to the new person, and then have that new person toss in front of your dog.
After your dog is looking forward to the new person tossing the food at him/her, have the new people actually give your dog the food. NOTE: Make sure the person does not lean over or get too close to your dog. Also, make sure you use verbal praise whenever they receive a treat!! If your dog is comfortable being that close to the new person then have that person give him/her multiple treats. Asking the person to kneel down and give a treat is also recommended.
The last step is having a new person touch your shy dog. This step is tricky. The only time you should let someone touch ANY dog is when they say it's OK. It's rude to touch anyone (no matter what the species) without their permission. If your dog is comfortable receiving multiple treats ask the person to kneel down and reach his/her hand out. When your dog shows interest in his/her hand then have the person scratch your dog under the chin. What will most likely happen is your dog will spaz and run to you. When this happens react as if your dog is being silly. Say something like "What are you doing they just want to pet you" and give the person another treat and ask them NOT to try and pet your dog, simply kneel down and give him a treat. The reason for this is that you don't want to make a big deal about the dog being afraid while encouraging him/her to go back to the person. Over time your dog will realize that nothing bad will happen and he/she will let someone pet him.
Throughout the process of getting your shy dog used to new people you must not push too hard and stay patient. You will spend most of your time simply standing there saying "No you can't pet my dog". But, most dogs that are afraid of new people just need to look at people and watch how they move. It's a lot like people who were never around dogs, they are afraid of them due to lack of exposure NOT experience.