Before I start I don't think Otis is that dog named Otis from "Training day" because when he got turned into a dog he looked NOTHING like that.
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Its like the Olympia that was Ms O's assistant and the one from season 2.
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Just because they have the same name doesn't mean they're the same person!
Ok back to my theory.
My theory: Otis was a villain's pet dog.
Warning: Possible spoilers
Otis was once a loyal pet that did everything his owner wanted him to do. For years he would assist his owner in causing oddness. With his smelling abilities he was able to track down any agents coming after them.
Years past by and Otis got tired of causing oddness, he even started HATING it. He wanted oddness to end and he wanted a life free of crime so he ran away.
Ms O finds him and somehow discovers that Otis belonged to a villain. Since he did not want to cause oddness anymore Ms O turns him into a human in order for him to have the chance to change his life and to be an Odd Squad agent without the danger of villains discovering him. Instead of sending Otis to the academy she takes him to a special school so he can learn how to act like a human and how to read and write like one. Even though he did not study anything, Ms O figured he would still make a great agent because dogs are smart and are excellent smellers.
