update checkbox and return value from dialog in flutter

Your dialog needs to be a StatefulWidget (Flutter Github issue). The member variable that tracks selection state needs to be in the dialog class. You can use a callback to update a member variable in your parent class with the List of selected cities. There also seem to be some issues using a ListView.builder inside of a SimpleDialog or AlertDialog (search the Flutter Github for issues) so I used a plain Dialog.

import 'package:flutter/material.dart';

void main() => runApp(MyApp());

class MyApp extends StatelessWidget {
  @override
  Widget build(BuildContext context) {
    return MaterialApp(
      title: 'Flutter Checkbox Dialog Demo',
      theme: ThemeData(
        primarySwatch: Colors.blue,
      ),
      home: MyHomePage(title: 'Flutter Checkbox Dialog Demo'),
    );
  }
}

class MyHomePage extends StatefulWidget {
  MyHomePage({Key key, this.title}) : super(key: key);
  final String title;

  @override
  _MyHomePageState createState() => _MyHomePageState();
}

class _MyHomePageState extends State<MyHomePage> {
  bool checkboxValueCity = false;
  List<String> allCities = ['Alpha', 'Beta', 'Gamma'];
  List<String> selectedCities = [];

  @override
  Widget build(BuildContext context) {
    return Scaffold(
      floatingActionButton: FloatingActionButton(
          child: Icon(Icons.add),
          onPressed: () {
            showDialog(
                context: context,
                builder: (context) {
                  return _MyDialog(
                      cities: allCities,
                      selectedCities: selectedCities,
                      onSelectedCitiesListChanged: (cities) {
                        selectedCities = cities;
                        print(selectedCities);
                      });
                });
          }),
    );
  }
}

class _MyDialog extends StatefulWidget {
  _MyDialog({
    this.cities,
    this.selectedCities,
    this.onSelectedCitiesListChanged,
  });

  final List<String> cities;
  final List<String> selectedCities;
  final ValueChanged<List<String>> onSelectedCitiesListChanged;

  @override
  _MyDialogState createState() => _MyDialogState();
}

class _MyDialogState extends State<_MyDialog> {
  List<String> _tempSelectedCities = [];

  @override
  void initState() {
    _tempSelectedCities = widget.selectedCities;
    super.initState();
  }

  @override
  Widget build(BuildContext context) {
    return Dialog(
      child: Column(
        children: <Widget>[
          Row(
            mainAxisAlignment: MainAxisAlignment.spaceBetween,
            children: <Widget>[
              Text(
                'CITIES',
                style: TextStyle(fontSize: 18.0, color: Colors.black),
                textAlign: TextAlign.center,
              ),
              RaisedButton(
                onPressed: () {
                  Navigator.pop(context);
                },
                color: Color(0xFFfab82b),
                child: Text(
                  'Done',
                  style: TextStyle(color: Colors.white),
                ),
              ),
            ],
          ),
          Expanded(
            child: ListView.builder(
                itemCount: widget.cities.length,
                itemBuilder: (BuildContext context, int index) {
                  final cityName = widget.cities[index];
                  return Container(
                    child: CheckboxListTile(
                        title: Text(cityName),
                        value: _tempSelectedCities.contains(cityName),
                        onChanged: (bool value) {
                          if (value) {
                            if (!_tempSelectedCities.contains(cityName)) {
                              setState(() {
                                _tempSelectedCities.add(cityName);
                              });
                            }
                          } else {
                            if (_tempSelectedCities.contains(cityName)) {
                              setState(() {
                                _tempSelectedCities.removeWhere(
                                    (String city) => city == cityName);
                              });
                            }
                          }
                          widget
                              .onSelectedCitiesListChanged(_tempSelectedCities);
                        }),
                  );
                }),
          ),
        ],
      ),
    );
  }
}

Although Albert's answer works, you need not go thru all that. Simply wrap the content: with a StatefulBuilder, voila! https://api.flutter.dev/flutter/widgets/StatefulBuilder-class.html.

Note: It is important where you declare the variable(s) you want to change.

Use StatefulBuilder to update Widgets only inside Dialog. StatefulBuilder is best for update sebsection of the widget tree where state is needed.

simple code snippet

    void _showDialog() {
    showDialog(
      context: context,
      builder: (context) {
        return StatefulBuilder( // StatefulBuilder
          builder: (context, setState) {
            return AlertDialog(
              actions: <Widget>[
                Container(
                  width: 400,
                    child: Column(
                      crossAxisAlignment: CrossAxisAlignment.center,
                      children: <Widget>[
                        Text(
                          "Student Attendence",
                          style: TextStyle(fontSize: 20),
                        ),
                        SizedBox(
                          height: 5,
                        ),
                        Container(
                          height: 2,
                          color: Colors.black,
                        ),
                        SizedBox(
                          height: 15,
                        ),
                      CheckboxListTile(
                        value: user1,
                        title: Text("user1"),
                        onChanged: (value){
                          setState(() {
                            user1=value;
                          });
                        },
                      ),
                        Divider(
                          height: 10,
                        ),
                        CheckboxListTile(
                          value: user2,
                          title: Text("user2"),
                          onChanged: (value){
                            setState(() {
                              user2=value;
                            });
                          },
                        ),
                        Divider(
                          height: 10,
                        ),
                        CheckboxListTile(
                          value: user3,
                          title: Text("user3"),
                          onChanged: (value){
                            setState(() {
                              user3=value;
                            });
                          },
                        ),
                        Divider(
                          height: 10,
                        ),
                        CheckboxListTile(
                          value: user4,
                          title: Text("user4"),
                          onChanged: (value){
                            setState(() {
                              user4=value;
                            });
                          },
                        ),
                        Divider(
                          height: 10,
                        ),

                        SizedBox(
                          height: 5,
                        ),
                        Row(
                          mainAxisAlignment: MainAxisAlignment.spaceEvenly,
                          children: <Widget>[
                            Material(
                              elevation: 5.0,
                              color: Colors.blue[900],
                              child: MaterialButton(
                                padding: EdgeInsets.fromLTRB(
                                    10.0, 5.0, 10.0, 5.0),
                                onPressed: () {},
                                child: Text("Save",
                                    textAlign: TextAlign.center,
                                    style: TextStyle(
                                      color: Colors.white,
                                      fontSize: 15,
                                    )),
                              ),
                            ),
                            Material(
                              elevation: 5.0,
                              color: Colors.blue[900],
                              child: MaterialButton(
                                padding: EdgeInsets.fromLTRB(
                                    10.0, 5.0, 10.0, 5.0),
                                onPressed: () {
                                  setState(() {
                                    Navigator.of(context).pop();
                                  });
                                },
                                child: Text("Cancel",
                                    textAlign: TextAlign.center,
                                    style: TextStyle(
                                      color: Colors.white,
                                      fontSize: 15,
                                    )),
                              ),
                            ),
                            Material(
                              elevation: 5.0,
                              color: Colors.blue[900],
                              child: MaterialButton(
                                padding: EdgeInsets.fromLTRB(
                                    10.0, 5.0, 10.0, 5.0),
                                onPressed: () {},
                                child: Text("Select All",
                                    textAlign: TextAlign.center,
                                    style: TextStyle(
                                      color: Colors.white,
                                      fontSize: 15,
                                    )),
                              ),
                            ),
                          ],
                        )
                      ],
                    ))
              ],
            );
          },
        );
      },
    );
  }

example