Recent EXOSAT observations of active galactic nuclei are presented. Unlike earlier X-ray satellites (all of which flew in low earth orbit), the deep orbit of EXOSAT allows long continuous observations of celestial X-ray sources, uninterrupted by earth occultation etc. We present the results of EXOSAT observations of several AGN which have been seen to vary rapidly (timescale 0.2–6 hours). We also consider the implications of rapid variability in AGN. For Seyfert galaxies and quasars, we find a highly significant correlation between the timescale of variability and their X-ray luminosity. They are not, howwever, bounded either by the (classical) Eddington limit nor by efficiency arguments. We sugest, rather, that the emitting plasma is dominated by electron-positron pairs.