: How can one write good dialogue in a story without sounding wooden? I began an assignment to write a short story for a Creative Writing submission to a publication and although it was accepted,

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Well-written, compelling dialogue does two different things simultaneously.

1. Good dialogue moves the story forward.

The more words you use to say something, the more characters you use to build an impression of a social set, the more place-names or magic-system rules or historical tidbits you weigh your reader down with, given a certain amount of narrative, the less you're really telling a story and the more you're just offering up lore. The same reason you don't have twenty major characters instead of five, or three, or one, is the same reason you shouldn't have characters saying things don't matter to move the story forward. This is narrative economy. (And other posters have remarked on it.)

2. Good dialogue makes sense in-universe.

This can be easily lost sight of, but it is the underlying reason why, for example, packing exposition into dialogue often sounds kind of absurd. "Why is that character telling the other character something everyone in the story would already know?" You, the author, have to contrive the situation so that, not only do the things said inform the reader and move the story forward, they are also completely plausible as something the particular character would think, and say out loud, at just the time you're portraying.

Dialogue often sounds wooden and out of character because the author pays plenty of attention to narrative economy, and largely ignores in-universe causality. (In fairness, many readers are a little thick about in-universe causality, so writers often get away with it.)

There ISN'T a magic formula. Writing well is hard; it takes practice, and recognizing and working on the aspects you aren't good at. But it's a skill that can be learned.

I also think that Chris Sunami's answer is very good in regards to acquiring a nuts-and-bolts notion of the how of making dialogue sound more natural.

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Every aspect of writing comes alive when it has multiple levels to it. Characters saying exactly what they mean, in a purely functional manner, is boring, unnatural, and superfluous. But great dialogue is so much more than functionality:

Sound: Even in real life, some people have a tendency to speak in unconscious poetry. And in fiction, you have free license to make your character's utterances as beautiful as you want --if it fits your story.
Attitude: Your dialogue should expose your characters' inner lives and mental states. Is your character angry? Annoyed? Blissful? Lustful? It should come out in the word choice.
Context: There is also a host of things that make dialog more interesting that have nothing to do with the actual words. For example, your character is a bank robber trying to make small talk with the teller to distract him from her partner sneaking over to the safe: "Lovely weather, isn't it?" It's interesting because it needs to fool someone, not because of anything in the dialogue itself.
Subtext: Last, but perhaps most important, is the subtext. People often say one thing and mean another. I recommend trying two passes through on your dialogue. In the first pass, have the characters say exactly what is most important to them, in a very direct way. In the second pass, rewrite the dialogue so that the characters are hiding what they really mean. "Um..." can mean "I'm in love with you, and now that we're face to face, I don't know what to say." Or it could mean "I think that's a terrible idea, but I don't want to destroy your dreams." When the subtext is strong enough, the actual dialogue can be banal and thin and still fascinate the reader.

I always believe we write best the things we love. If you're weak on dialogue, spend some time really listening to people's conversations, and learning to love the way they talk to each other, the poetry of their metaphors and idioms, the way they do and don't say what they mean.

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Characters interrupt each other
People don't always wait for one another to finish speaking (and say "over" to indicate they are done) before they start talking. To extend Amadeus answer from above:

"That is a beautiful necklace, did you just get it? I haven't gotten any new jewelry in so long. I was going to buy myself something but my hus-"
"I saw your husband leaving the Emporium yesterday, didn't get the chance to say hello. I love that place!"
"Oh, really? We love it too." He told me he went to Dallas, yesterday.

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Treat it like a play. Read the conversation aloud. Does it sound like something the character would say? Does it build either character, plot or world? If not, why is it there? Is it something that someone would say: "Good morning" may not be building anything, but you don't want your character to sound rude either, as in walking up to someone and just start talking. So try to sound natural. If it sounds odd to the ear, then it is probably odd to the eyes. Unless you intended it to be odd.

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You leave out small talk by focusing on big talk!
By this I mean every thing a person says should be something at least one person in the conversation needs to hear, or wants to hear, or is surprised to hear, or if the other person ignores it, should have wanted to hear.
Dialogue has consequence. Cut out lines that don't have a purpose, or aren't going to have an impact on anybody. The impact does not have to be positive, the information conveyed could be confusing, devastating, joyful, relieving, it may explain something important to them. Even if the speaker thinks they are not saying anything revelatory, the listener might find it revelatory.

"I saw your husband leaving the Emporium yesterday, didn't get the chance to say hello. I love that place!"
"Oh, really? We love it too." He told me he went to Dallas, yesterday.

The only rule is, somebody has to care about it.
If you can't think of anything BIG to talk about, don't write dialogue. Write action, or skip time in the story until something interesting can be said or done or happen.
Make sure your dialogue serves a purpose that is clear to at least you, in terms of providing information, or revealing something about a character, or illustrating or sharing some emotion.

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Dialog in a story serves to advance the story or develop character.

I’ve been taught that dialog isn’t conversation as much as its the ‘best of conversation.’ It condenses while it evoke emotions. It informs while obfuscating falsehoods, making them seem true and vice versa.

If you are unsure about your characters dialog when you work your draft, you can either just go nutz and write it all out without trying to make it really good and pity, or you can just summarize your goal as a writer what you want to happen as a result of this dialog.

Later, you can rework it once you have a better perspective on the characters or events.

I find the more momentum I can maintain writing dialog the easier it is develop.

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Writer and former editor Jenna Moreci has a great series of YouTube videos that delve into lots of different writing topics. Some of them discuss dialogue, and here are a few cherry-picked tips of hers that you might find helpful:

Avoid banal pleasantries. If you're reading a story that has lots of small talk, it may have been poorly written. Small talk may be realistic, but it's boring to read and you should almost always leave it out-- unless it serves a narrative purpose. (Jenna uses the example of a character who wakes in a cold sweat from night terrors; her mother asks her the next morning how she slept, and she responds, "Oh, just fine." In most situations, this conversation is banal and shouldn't be included in a story, but here it tells you something about the main character.)
Read it out loud. To address your question more specifically, one way to make dialogue seem less forced and more natural is to read it out loud to yourself. If it seems clunky, rewrite it.

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There isn't one, fiction, both reading it and writing it is a subjective experience, everyone sees it differently so there's no single formula that works in all cases. The best way to learn good writing is by reading good writing. You need to find dialogue that you do enjoy reading, that doesn't cause you to disengage and learn from the style of the author(s) who wrote it.

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