Added ingredients can cause unwanted side effects, so be sure to read your peanut butter label. Xylitol, a sugar substitute, is toxic to dogs. This is a particularly tricky ingredient because xylitol can show up in peanut butter advertised as sugar-free. As a sugar alcohol, xylitol can lead to a big drop in blood sugar levels (also known as xylitol poisoning), which can be life-threatening, causing seizures, liver failure, and worse.