The interaction of subsonic plasma flow with a neutral particle cloud via charge exchange is considered. We derive a general expression for the velocity potential of the plasma flow induced by charge exchange interaction in the axisymmetric case. The particular case of the interaction of uniform plasma flow with a spherically symmetric distribution of neutral particles is considered in detail. It is shown that charge exchange interaction is able to stagnate the plasma flow completely at a finite distance along the stagnation line, and to redirect the plasma flow around the neutral cloud. We argue that this simple situation could represent the main features of the interaction of the interstellar wind with high-speed solar hydrogen flowing from the inner heliosphere. Thus the heliopause could in part, if not as a whole, actually result from this particular form of charge exchange interaction. The degree of ionization of the local interstellar medium is shown to determine the extent of the role of the charge exchange interaction. For a partially ionized interstellar wind, charge exchange plays the main role in slowing down and stagnating the interstellar wind, while for a highly ionized interstellar wind, its role is secondary to the direct gasdynamic interaction of the two counter streaming plasmas. ¿ American Geophysical Union 1996