In most of the works done by discourse analysts-all those who have studied language-in-use and some literary critics and sociolinguists we can see at last the rapprochement between literary studies and language studies. Like everyday language, literary language too is used with certain communicative goals in view. That is, the writer wants to achieve certain goals- to express a point of view, to create certain effects, and so on. Often these goals are achieved simultaneously through one piece of writing (or speech). According to Burton, analysis of a literary text involves understanding the fictional reality of the text and by this, the constituent parts of the fiction. Grice in his theory of implicature discusses how ‘meaning’ is arrived at by deriving “implicatures” which results when the maxims of relevance, truth and economy are deliberately flouted in communicative act. Wilson and Sperber have applied the notion of relevance in particular, to understand the operation of effects such as metaphor and irony in literature. Grice’s theory is also important for literature as it is less restricting than Searle’s categorizations and offers a way out from considering language behavior as ‘rule bound’ to explaining how it escapes from such rule-governance. This pragmatic approach and the social-functional approach in the analysis of discourse have helped to explain language in everyday social interaction as well as in literature. This paper presents recent trends in discourse analysis and the implications of these for the study of literature. This article has five parts. The first part will be an introduction and the relation of discourse analysis and literature will be presented. The second part bears the title of “the state of the art in the study of literary discourse.” The third part of the article discusses “a ‘contextual’ approach to literary texts” and the problems and methods will be discussed. In the fourth part, the paper presents “implications of the contextual approach” and the last part of the paper will conclude the study and presents some questions for further studies.

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