Internal monologues play a crucial role in character development as they provide insight into a character's thoughts, emotions, motives, and internal conflicts. By allowing readers to see the inner workings of a character's mind, internal monologues deepen the understanding of the character's personality and help to create a more complex and believable portrayal. This introspection can reveal a character's growth, struggles, and transformation throughout the story, making them more relatable and engaging to the audience.