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Dilute coloration, which is what causes rare and exotic colors in dogs, is caused by gene variants. Several variants result in dilute colors, which are often light and pale shades of other colors. For example, chocolate can become silvery red or lilac, and black can become gray or blue.
As their name implies, the lilac dog coat often has lilac or blue coloring, resulting in a silvery or gray look. The color comes from a recessive gene inherited from its parents.
When affected by diluted color, puppies usually start out as black. For example, lilac bulldogs are born black but dilute twice: once by the chocolate gene and once by the blue gene. The bb gene mutates from black to brown and the dd gene mutates from black to blue. As this occurs, blue and brown are mixed, and what remains is lilac.