In English, we use the word "kidding" in expressions such as I'm kidding, just kidding, you must be kidding me... to express that we are teasing one another for fun. How can I convey this meaning in Italian?
“To kid” often corresponds to Italian scherzare (which has a similar meaning to “to joke” too). So, «I'm kidding» is Sto scherzando.
In other cases, it may correspond more to prendere in giro (which also means “to make fun of”, “to tease”). An idiomatic way to say “you must be kidding me” is stai scherzando? or mi stai prendendo in giro?
If you want a colloquial way of saying the closest equivalent to "kidding" in Italian, then just use the word "scherzo". Literally it means "I joke" but it's the most typical way that's said in day-to-day Italian.
Example: Davvero, ho battuto Kasparov a scacchi.... scherzo!
Since I'm new to stackexchange, I can't reply to the other comments, but "Devi star scherzando" sounds awful. No Italian would ever use it. So you shouldn't either.
The only parallel I can think of is if an Italian said you you "You must be making joke to me". That's how fluent it sounds.
The verb kidding is translated with scherzare.
Hey, I'm just kidding.
Hey, sto solo scherzando.
Please, note that the last expression is translated a bit differently. When you're talking about something unusual, despite the English language, in Italian we tend not to use the kidding verb related to ourselves.
You must be kidding (me) -> Devi star scherzando.