Read popular novels, and take notes on how the author creates dialog. While this may sound obvious, you'd be amazed at how many writers don't read.
Watch popular films that feature characters of the same age, social class, occupation and location as your characters. Listen to the dialog and note any speech patterns, slang or frequented used words. Incorporate these ideas into your dialog.
Incorporate character movement into your dialog. For example
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Shelley covered her mouth to conceal a yawn. \"I don't think I'd be interested in reading that.\"
Often, you can use this sort of movement instead of repeating \"he said\" or \"she said.\"
Break up your dialog. Instead of saying:
Shelley said, 'I didn't enjoy your book. It's too long and the dialog is unrealistic.\"
Try this:
\"I didn't enjoy your book, \" Shelley apologized. \"It's too long, and the dialog is unrealistic.\"
Avoid over use of the word 'said.\" Look for alternative words that would describe how things are said, such as teased, joked, admonished, scolded or cried.
Use your dialog to show what you might be tempted to tell your readers. For example, instead of saying:
Mariel had beautiful long hair, try
David stroked Mariel's hair. \"I'm so glad you decided not to cut your hair,\" he said.
Use contractions and incomplete sentences. This is how people really talk. You might have to ignore the corrections that are made by your word processor. The exception to this rule occurs when you are writing a period piece. In this situation, your dialog would be more formal.
Read your dialog out loud. If it does not sound realistic, do a re-write.
Have fun with regional accents.
\"You can pahk the cah while I get the pizzar,\" he said.
Susan stifled a laugh. I guess you're from Boston.