In this chapter we review the formation and evolution of compact binaries with neutron star and/or black hole components (i.e. LMXBs, HMXBs, binary pulsars). After an introduction we discuss stellar evolution in binaries and the processes involved in the mass-transfer phases of close binaries (RLO, CE, ang.mom.loss) with radiative/convective hydrogen or helium donor stars. We also describe the effects of accretion, asymmetric SN and systems merging as a result of gravitational wave radiation.