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The Pali Canon was compiled hundreds of years after the Buddha, but we know from comparative studies that the bulk of the material contained in it (and for that matter, the Suttas of the other schools) does go back quite a ways.
As for the language, that's a hard thing to answer. From a linguistic standpoint, Pali seems to be a blend of several eastern and western dialects together with some Sanskrit. Some have hypothesized that it is some form of an old trade language, something that people in different parts of northern India would have known how to speak in order to talk with people from other regions, and others think that this mixture of dialects was done later to harmonize the texts. In any case, it's a rather tricky question and rather unclear if it would have really been commonly spoken in that region of India in the time of the Buddha due to the presence of western features in Pali.
Whatever the Buddha spoke it was probably closely related either to the language of Kosala or something related to Magadhi.
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The answer for this seems debatable, this is what I found in Vinaya, The Khandaka rules translated by Thanissaro Bhikku page 89,
Cv.V.33.1 reports the efforts of two brahman bhikkhus who set the Buddha’s teachings to meter after objecting to the fact that bhikkhus who had gone forth from different clans, different nationalities, different families were spoiling the Buddha’s words by putting it in “own dialect.” The Buddha however forbade that his teachings be set to meter, and allowed that they be learned by each in “own dialect.” There are two controversies surrounding these two rules. The first is over the meaning of own dialect. The Commentary insists that it means the Buddha’s own dialect, and that therefore the Dhamma must be memorized in Pali.
According to the commentary it seems Buddha's dialect is Pali. But Thanissaro Bhikku argues that epigraphic evidence suggests Pali is not Buddha's dialect. It is said to be the dialect of Ven. Mahinda, king Asoka's son, who came to Sri Lanka. So it must be either Magadhi or Pali which are said to have many similarities.
Upvote:1
The short answer is we don't know and there is debate on the topic. However, it is likely that, as the Buddha taught in various locations to various audiences, he spoke in local dialects or languages (or perhaps had interpreters). Some believe that there was mutual intelligibility to some of the dialects or languages. Also, the Buddha clearly had different audiences, some more literate or educated than others. Languages used by the educated might have been used for some audiences, but not for others.
In reality, it doesn't matter as what we do have is Pali language written in Sinhala script some 500 years after the Buddha died.
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The Buddha is believed to have spoken Magahi. The relationship to Pali is discussed articles relating to Prakrit and Magadhi Prakrit.