The current generation of interactive dialogue systems for over-the-telephone applications in real environments is limited to speaker independent recognition of isolated words and phrases or limited continuous speech such as digit strings. The five year ESPRIT SUNDIAL project, which concluded in August 1993, was aimed at developing a new generation of dialogue systems allowing spontaneous conversational interaction over the telephone. The project involved the development of four language prototypes for train timetable enquires in German and Italian and flight enquiries in English and French. A close integration of speech and language processing techniques has been achieved for understanding spoken input together with the use of AI techniques for intelligent dialogue management. Evaluation of prototypes in four languages has been completed with both naive and experienced users. A 96% transaction success rate has been achieved with the flight inquiry application in English over a local PBX connection using untrained speakers; lower performance was obtained for long distance PSTN connections with members of the public. A number of major lessons were learned from the project about the factors which are important in the design of spoken dialogue systems operating over the telephone. Some of these lessons are discussed in the paper.