The dwarf galaxy problem is one that arises from numerical cosmological simulations that predict the evolution of the distribution of matter in the universe. Dark matter seems to cluster hierarchically and in ever increasing number counts for smaller and smaller sized halos. However, while there seems to be enough observed normal-sized galaxies to account for this distribution, the number of dwarf galaxies is orders of magnitude lower than expected from simulation.

This problem has two potential solutions. One is that the smaller halos do exist but only a few of them end up becoming visible because they haven't been able to attract enough baryonic matter to create a visible dwarf galaxy. The other solution may be that dwarf galaxies tend to be gobbled up or tidally stripped apart by larger galaxies due to complex interactions. This tidal stripping has been part of the problem in identifying dwarf galaxies in the first place, which is an incredibly difficult task since these objects have low surface brightness and are so diffuse as to be virtually unnoticeable even in our own backyard.