The present study examines the effect of negotiated interaction on Mongolian-nationality EFL learners' spoken production, focusing on the teacher-learner interaction in a story-telling task. The study supports the hypothesis that interaction plays a facilitating role in language development for learners. Quantitative analysis shows that Mongolian learners gained significant improvement on language accuracy and fluency. The interaction offered occasions for phonological, syntactical as well as semantic language development for individual learners. However, how far these occasions may serve as a facilitating tool for language development depended on the learners' response in the interaction and their uptake in subsequent language production. The analysis also shows that Mongolian learners drew their attention to meaning prior to language forms in dealing with input and output. Their performance was not so much determined by their present language proficiency level, but rather by their L1 background (Mongolian), L2 (Chinese) and negotiation types they engaged in.