Students face a complex, globalized, digitalized and polarized world, with world-wide challenges such as the pandemic, climate change and political conflict. In this context, the younger generations face the challenge of developing complex, yet articulated, identities to collectively imagine possible futures in an uncertain and fragmented world. Schools can address part of this challenge by promoting peer dialogue in classrooms, but only if we understand it as developmental experiences in which thinking and academic learning are intertwined with emotion and the development of identities. Research in the field has advanced the academic, personal and socio-emotional outcomes of peer interactions. However, these lines have unfolded practically in parallel, partly because of the lack of a theoretical argument about how peer dialogue fosters these developmental processes in the same stream of life. This article argues the need for a holistic theoretical perspective about classroom peer dialogue, and it proposes, based on the work of Vygotsky and contemporary scholars, that language, especially inner speech, is key to understanding its developmental potential. The diverse use of language among peers forms and performs--through other-directed and self-directed speech--not only new ways of thinking but also--and with complex interconnections--new ways of feeling and becoming bodies, and relating to themselves, that have historical and cultural roots but singular outcomes for each individual.