"Evolution" wouldn't necessarily be the proper term unless this was supposed to be taking place millions of years in the future. As others have already noted, it's a very slow process, and even an ultra-selective breeding program wouldn't be able to hasten the process enough for us to see outwardly apparent results in one's lifetime.
A possible alternative explanation would be genome mapping. IE: Science not only completely maps the human / animal genetic codes, but has such a precise understanding of exactly what does what that they could, at least in theory, engineer a new species altogether. Which would be a long and arduous process, but if the second generation could be produced by the first generation breeding naturally, the results would be long-lasting.
So if, for example, they knew exactly what parts of the genome gave humans their upright posture, their large brains and their five-fingered hands, they could (in a nutshell) insert those sections into the genetic code of a dog or wolf, assemble it piece by piece, and create the first generation of a species with the desired combination of human and canine traits.
What I would assume is that this kind of breakthrough wouldn't be intended for something trivial, but that its developers would start there so they could have something to show off to the world / attract investors (kind of like how the
Honda ASIMO constantly gets programmed to do mundane crap like dance or serve drinks -- it's to show the extent of what they could do with it).
The werewolf equivalent in your story could have begun as a beta species, if you will; as a new species developed with a mundane or at least harmless purpose in mind. It could have started, for example, as intended to be the ultimate service dog; able to grasp objects and understand complex instructions as effectively as a hired nurse but with the kind of loyalty and devotion that only a canine can offer. Which, even if only intended as a pitch to investors, could have sustained as long as both male and female members of the beta species were produced.
So the first of that werewolf-like species most likely would have been based on a German Shepherd -- a species used in both police work and service training. Other variants may have then been developed at later times with more specific tasks in mind (Huskies or Saint Bernards for use in the arctic, for example), with other variants later appearing as the various first-gens start to breed with each other, or even (dare I suggest it), if the developers were lazy and carried over the exact same chromosome count from either template species, with normal dogs and/or humans.
And given the ability to sustain their own numbers (which would be necessary, given the presumably arduous process of building the first generation), it would certainly be possible that the designer species(s) could, in theory, passively replace humanity. If cano-sapiens are better at some jobs than humans, and just as good at all the others but much happier to be doing them, that equates to little opportunity left in the world for homo-sapiens, and that in turn equates to far less incentive to start a family. Over the course of a few centuries, the entire human race could wind up being reduced to
a severely inbred richest 1% and whoever could swallow their pride enough to let themselves (figuratively or literally) become a cano-sapien's pet human.