SCHOLAR is a computer-assisted instruction (CAI) system which is capable of true man-computer dialog. Using a subset of English, the system is capable of generating questions, answering questions, analyzing responses, and producing subsequent actions. SCHOLAR has a data base that is a complex but well defined information structure in the form of a "semantic network" of facts, concepts, and procedures. The system does not anticipate conversational items, but interprets and answers questions in terms of the data base. This report describes SCHOLAR, covers the theory supporting it and its implementation, and compares it with other CAI systems. Technical discussions are provided of the "semantic network," the natural language communication system, and other unique features of the system. The present implementation of the SCHOLAR system for a verbally oriented training program is discussed in detail. Actual on-line protocols from a geography lesson on South America are used to illustrate the main features of SCHOLAR. Some of the pedagogical and artificial intelligence questions considered in developing SCHOLAR are examined. (JY)