The vast majority of pre-solar grains recovered to date show the signature of an origin in asymptotic giant branch (AGB) stars. In AGB stars, the abundances of elements lighter than silicon and heavier than iron are largely affected by proton- and neutron-capture processes, respectively, while the compositions of the elements in between also carry the signature of the initial composition of the star. Dust is produced and observed around AGB stars and the strong mass loss experienced by these stars is believed to be driven by radiation pressure on dust grains. We briefly review the main developments that have occurred in the past few years in the study of AGB stars in relation to dust and pre-solar grains. From the nucleosynthesis point of view these include: more stringent constraints on the main neutron source nucleus, 13C, for the slow neutron capture process (the s process); the possibility of pre-solar grains coming from massive AGB stars; and the unique opportunity to infer the ‘isotopic’ evolution of the Galaxy by combining pre-solar grain data and AGB model predictions. Concerning the formation of grains in AGB stars, considerable progress has been achieved in modelling. In particular, self-consistent models for atmospheres and winds of C-stars have reached a level of sophistication which allows direct quantitative comparison with observations. In the case of stars with C/O < 1, however, recent work points to serious problems with the dust-driven wind scenario. A current trend in atmosphere and wind modelling is to investigate the possible effects of inhomogenieties (e.g., due to giant convection cells) with 2D/3D models.