Dialogue is conversation between two or more persons. The rules for quotation are the same.

Use quotation marks to enclose direct quotations:

"Anger makes men witty, but, it keeps them poor."

QUEEN ELIZABETH I

A new paragraph begins with each change in speaker, even if the result is a paragraph of only one sentence or only one word:

"Where are you headed?" she asked.
"Home."
"When do you think you'll be back?" she persisted.

"If a quotation appears at the beginning of a sentence it is set off by a comma, unless the quotation ends with a question mark or exclamation point," says the Bedford Handbook.

"Is this plaigarism?" asks Trace.

"No way!" responds Lynnon.

If two successive quoted sentences from the same source are interrupted by explanatory words, use a comma before the explanatory words and a period after them:

"It is really quite tragic," she sighed. "I try not to think about it."

If a quotation is broken up by explanatory words, use commas to set off the explanatory words:

If you would like," said Gina, "we can have a response from outside groups."

Periods and commas are always placed inside quotation marks:

"Don't put a comma on the outside of quotation marks," warned Colin. "Imbecile! It belongs inside," he continued.

Colons and semicolons are placed outside quotation marks:

Read Rhonda's new story, "Belle Bottoms"; it is outrageous!

Question marks and exclamation points are placed inside quotation marks unless they apply to the whole sentence:

Have you heard the proverb, "Don't cry over spilled milk"?
"Complaining about your review is like crying over spilled milk!" she declared.

If a quotation involves a whole paragraph, quotation marks are used only at the beginning and end of the paragraph, not at the beginning of each sentence:

"Capital punishment and life imprisonment are equally immoral; but if I were offered the choice between them I would certainly choose the second. It's better to live somehow than not at all."

ANTON CHEKOV

A quote within a quote is set off by single quotation marks:

"I love singing 'The answer, my friend, is blowing in the wind...'; it's so peaceful," said Lily.