This study examines the production of topical talk in peer collaborative negotiation in an interactive assessment innovation context. The ability to stay on topic, to move from topic to topic and to introduce new topics appropriately is at the core of communicative competence. Applying conversation analysis (CA), we describe and analyze how one group of secondary ESL students orient to and construct what they take to be relevant to the assessment task as interaction proceeds. We found that in the context of group oral discussion described in our study, in the course of turn-by-turn interaction which was characterized by intensive engagement and active participation between peer participants, this group of students were able to pursue, develop, and shift topics to, on the one hand, ensure the successful completion of the assigned task, and on the other, to display individual contributions. Topical transitions appeared to be the result of participants constantly monitoring the content of talk for relevance to the assessment task agenda. Such negotiation of topical talk among the participants indicates that peer group discussion as an oral assessment format has the potential to provide opportunities for students to demonstrate ‘real-life’ interactional abilities to relate to each other in spoken interaction. Copyright © 2008 Oxford University Press.