Upon hearing a conspecific signal, animals must assess their relationship with the signaller and respond appropriately. Territorial animals usually respond more aggressively to strangers than neighbors in a phenomenon known as the “dear enemy effect”. This phenomenon likely evolved because strangers represent a threat to an animal's territory tenure and parentage, whereas neighbors only represent a threat to an animal's parentage because they already possess a territory (providing territory boundaries are established and stable). Although the dear enemy effect has been widely documented using behavioral response variables, little research has been conducted on the physiological responses of animals to neighbors versus strangers. We sought to investigate whether the dear enemy effect is observed physiologically by exposing territorial male song sparrows (Melospiza melodia) to playback simulating a neighbor or a stranger, and then collecting blood samples to measure plasma testosterone levels. We predicted that song sparrows would exhibit increased testosterone levels after exposure to stranger playback compared to neighbor playback, due to the role testosterone plays in regulating aggression. Contrary to our prediction, we found that song sparrows had higher testosterone levels after exposure to neighbor playback compared to stranger playback. We discuss several explanations for our result, notably that corticosterone may regulate the dear enemy effect in male song sparrows and this may inhibit plasma testosterone. Future studies will benefit from examining corticosterone in addition to testosterone, to better understand the hormonal underpinnings of the dear enemy effect.