Low‐mass stars in close orbits around supermassive black holes in active galactic nuclei (AGN) may provide an important signature for testing the existence of supermassive black holes. Here we discuss how such systems can form by being ‘‘ground down’’ by their interaction with an AGN accretion disk and discuss the peculiarities of such binaries with extreme mass ratios. In particular, we show that, in the case of a low‐mass main‐sequence companion, the orbit has to be circularized to avoid tidal disruption. If the companion is filling its Roche lobe, mass loss will occur through the outer Lagrangian point rather than the inner because of irradiation effects (this may also be important for some binary pulsars like PSR 1957+20). Finally, we discuss possible signatures of such systems. ©1994 American Institute of Physics.