The star HR 7581 (Iota Sgr) was observed in SPHERE survey mode (parallel observation in the near infrared with the dual imaging camera and the integral field spectrograph ). A very low mass star, more than 4000 times fainter that its parent star, was discovered orbiting Iota Sgr at a tiny separation of 0.24". This is a vital demonstration of the power of SPHERE to image faint objects very close to bright ones. The bright star itself has been suppressed almost completely by SPHERE, to allow the faint companion to appear as a clear bright spot to the upper right of the centre. This shows the great potential for SPHERE to detect exoplanets.