Two experiments examined the restriction of referential domains during unscripted conversation by analyzing the modification and online interpretation of referring expressions. Experiment 1 demonstrated that from the earliest moments of processing, addressees interpreted referring expressions with respect to referential domains constrained by the conversation. Analysis of eye movements during the conversation showed elimination of standard competition effects seen with scripted language. Results from Experiment 2 pinpointed two pragmatic factors responsible for restriction of the referential domains used by speakers to design referential expressions and demonstrated that the same factors predict whether addressees consider local competitors to be potential referents during online interpretation of the same expressions. These experiments demonstrate, for the first time, that online interpretation of referring expressions in conversation is facilitated by referential domains constrained by pragmatic factors that predict when addressees are likely to encounter temporary ambiguity in language processing. (Contains 1 table, 11 figures, and 2 notes.)