Canine Influenza Virus H3N2, initially of avian origin, emerged in Asia around 2005–2007 and subsequently spread globally, reaching the United States in 2015. Despite initial containment efforts, H3N2 CIV re-emerged in several US states in 2023. This study investigates the evolution and transmission dynamics of H3N2 CIV identified in companion dogs during an outbreak in Alabama, USA, between August and October 2022. We performed whole-genome sequencing on five H3N2 CIV isolates and conducted phylodynamic modeling, incorporating 100 global H3N2 CIV genomes per segment. Phylogenetic reconstruction showed the Alabama strains formed distinct, tightly clustered groups, suggesting recent common ancestry and localized evolution. Phylogeographic inference revealed discordant origins for different gene segments. The HA, MP, NP, NS, and PA genes traced ancestry to California strains, the NA gene to Florida strains, and the PB1 and PB2 genes to Illinois strains. This genomic incongruence strongly indicates that the Alabama outbreak strain emerged through a reassortment event involving viruses from these three geographically distinct regions. The findings highlight reassortment as a crucial mechanism driving CIV H3N2 evolution and spread, likely facilitated by the movement of infected dogs. Low canine vaccination requires continued surveillance and shelter-focused vaccination to control CIV outbreaks and monitor adaptation.