A particle simulation code has been developed to study ion optics and the effect of charge‐exchange‐induced grid erosion in electron bombardment ion thrusters. The code is based on the particle‐in‐cell method to simulate the beam extraction and ion optics and a Monte Carlo method to calculate the charge exchange collisions between fast beam ions and neutral particles. The space charge effects for both fast beam ions and slow charge exchange ions are included. Both two‐ and three‐dimensional versions of this code have been developed for both two‐grid and three‐grid systems. The two‐dimensional model provides a qualitative description of the details of the ion flow and the charge exchange collisions. The three‐dimensional version has successfully predicted the experimentally observed erosion pattern in which the maximum erosion occurs at the geometric centers of accelerator grid apertures.