After the death of Nur ad-Din, who was planning to campaign against his too powerful subordinate, Saladin proclaimed himself sultan of Egypt, thus beginning the Ayyubid dynasty. He spread his conquests westward on the northern shores of Africa as far as Qabis and also conquered Yemen. He took over Damascus after Nur ad-Din's death and undertook to subdue all of Syria and Palestine. He had already come into conflict with the Crusaders (see Crusades), and he put the rulers of the Latin Kingdom of Jerusalem (see Jerusalem, Latin Kingdom of) on the steadily weakening defensive. He was unsuccessful in his efforts to conquer the Assassins in their mountain strongholds, but he took Mosul, Aleppo, and wide areas from rival Muslim rulers and became the principal warrior of Islam.

Gathering a large force of Muslims of various groups—but all called Saracens by the Christians—he set out to attack the Christians. Raymond of Tripoli was at first his ally, but then joined the other Crusaders, and the great battle of Hattin (near Tiberias) in 1187 found Christians matched against Muslims. Saladin won brilliantly, capturing Guy of Lusignan and Reginald of Châtillon. The city of Jerusalem also fell to him. The Third Crusade was gathered (1189) and came to the Holy Land to try to recover Jerusalem. Thus it was that Richard I of England and Saladin met in the conflict that was to be celebrated in later chivalric romance. The reputation that Saladin had among the Christians for generosity and chivalry does not seem to have been a legend, and there seems no doubt that Saladin admired Richard as a worthy opponent. The Crusaders, however, failed in their purpose and succeeded only in capturing Akko. In 1192, Saladin came to agreement with the Crusaders upon the Peace of Ramla, which left the Latin Kingdom only a strip along the coast from Tyre to Yafo. The Christians were never to recover from their defeat.