Remove any existing interior wall covering, such as paneling or lath and plaster. Strip the walls to the framing studs. Inspect the studs to make sure they are intact and solid. Measure the distance between the studs: modern wall framing has studs with centers that are 16 inches apart, but these dimensions may be different in very old houses.
Adapt the drywall to the studs; drywall generally comes in 4-by-8 foot sheets to conform to 16-inch stud spacing. Longer sheets are available if walls are more than 8 feet high, which may be the case in old houses. Use 4-foot sheets if the studs are spaced at 24 inches. Install any required insulation with unfaced fiberglass batts or rigid foam board to avoid having a second moisture barrier.
Find a square wall corner to start; check the angles with a framing square. Set panels either horizontally or vertically, with the edge of the first sheet pressed firmly into the corner. Secure the panels with drywall screws driven in with a screw gun. For 1/2-inch drywall use 1 1/4-inch-long screws or longer screws if the drywall is thicker. Insert one screw into each wall stud. Drive the screw heads slightly below the surface of the drywall paper but don't tear the paper. Cut panels, as needed, with a utility knife or drywall saw.
Tape seams between the panels conventionally. Spread a layer of joint compound with a 4-inch drywall knife over each seam, press a strip of drywall tape into it then seal it with a second layer of compound or press adhesive-backed fiberglass tape over the seam and cover it with compound. Let that dry, sand it lightly then spread a second coat with a 6-inch drywall knife and feather the edges to the surface of the paper. Add a third coat, if necessary, for a smooth seam.