This article reports on a case study of negotiation that occurred in peer group oral interactions under assessment conditions. Discourse analysis was used to illustrate how participants negotiated and co-constructed the assessment format itself as well as meaning exchange sequences. Analyses of the data point to the advantage of using peer group discussion task in generating the interaction patterns representative of natural conversational situations. By concentrating on the situated dynamics and process of peer group functioning, this study also demonstrates the importance of peer learning opportunities that resulted from collaborative reasoning under assessment conditions, which have typically been ignored in the conventional testing paradigm. Implications of these findings over validity issues in oral language assessment are discussed. Copyright © 2008 Monash University ePress.