Follow the basic rules for structuring dialogue. This includes putting punctuation inside the quotation mark, starting a new paragraph when you switch speakers and using a comma to set off the verb of speaking from the quotation (e.g. James said, "Let's go to lunch").
Have a good sense of your characters. Dialogue should try to be as realistic as possible because it is a clear reflection of who the character is. For example, if you have a child talking, avoid using long, difficult words or, if the character is well-educated, do not have him or her use slang. Pay special attention to relatively unimportant characters; while they may not seem important, they may only be defined by their dialogue, as opposed to main characters who get additional descriptions in the text.
Avoid unnecessary plot exposition in dialogue. You do not want a scene in which the bad guy simply explains his evil plot. The plot should be handled by the action of the characters, and their dialogue should reflect their feelings about what is happening, as opposed to being an explanation. Plot exposition in dialogue is bad because it is distracting for the reader as well as being unrealistic.