After the failure of the Second Crusade, the Zengid dynasty controlled a unified Syria and engaged in a conflict with the Fatimid rulers of Egypt, which ultimately resulted in the unification of Egyptian and Syrian forces under the command of Saladin, who employed them to reduce the Christian states and to recapture Jerusalem in 1187. Spurred by religious zeal, Henry II of England and Philip II of France ended their conflict with each other to lead a new Crusade (although Henry's death in 1189 put the English contingent under the command of Richard I instead). The elderly Holy Roman Emperor Frederick I Barbarossa responded to the call to arms, and led a massive army across Anatolia, but died from drowning before reaching the Holy Land. Many of his discouraged troops left to go home.
After some military successes, the Christian powers argued over the spoils of war; frustrated with Richard, Frederick's successor, Leopold V of Austria and Philip left the Holy Land in August 1191. On September 2, 1192, Richard and Saladin finalized a treaty by which Jerusalem would remain under Muslim control, but which also allowed unarmed Christian pilgrims to visit the city. Richard departed the Holy Land on October 9. The failure of the Third Crusade would lead to the call for a Fourth Crusade six years later.
Eager to expand his power, Nur ad-Din set his sights on the Fatimid dynasty of Egypt. In 1163, Nur ad-Din's most trusted general, Shirkuh set out on a military expedition to the Nile. Accompanying the general was his young nephew, Saladin.
With Shirkuh's troops camped outside of Cairo, Egypt's sultan, Shawar called on King Amalric I of Jerusalem for assistance. In response, Amalric sent an army into Egypt and attacked Shirkuh's troops at Bilbeis in 1164.
In an attempt to divert Crusader attention from Egypt, Nur ad-Din attacked Antioch, resulting in a massacre of Christian soldiers and the capture of several Crusader leaders, including Raynald of Châtillon, Prince of Antioch. Nur ad-Din sent the scalps of the Christian defenders to Egypt for Shirkuh to proudly display at Bilbeis for Amalric's soldiers to see. This action prompted both Amalric and Shirkuh to lead their armies out of Egypt.
In 1167, Nur ad-Din once again sent Shirkuh to conquer the Fatimids in Egypt. Shawar also opted to once again call upon Amalric for the defence of his territory. The combined Egyptian-Christian forces pursued Shirkuh until he retreated to Alexandria.
Amalric then breached his alliance with Shawar by turning his forces on Egypt and besieging the city of Bilbeis. Shawar pleaded with his former enemy, Nur ad-Din to save him from Amalric's treachery. Lacking the resources to maintain a prolonged siege of Cairo against the combined forces of Nur ad-Din and Shawar, Amalric retreated. This new alliance gave Nur ad-Din rule over virtually all of Syria and Egypt.
Amalric also died in 1174, leaving Jerusalem to his 13-year old son, Baldwin IV. Although Baldwin suffered from leprosy, he was an effective and active military commander, defeating Saladin at the battle of Montgisard in 1177, with support from Raynald of Châtillon, who had been released from prison in 1176. Later, he forged an agreement with Saladin to allow free trade between Muslim and Christian territories.
Raynald also raided caravans throughout the region. He expanded his piracy to the Red Sea by sending galleys not only to raid ships, but to assault the city of Mecca itself. These acts enraged the Muslim world, giving Raynald a reputation as the most hated man in the Middle East.
Baldwin IV died in 1185 and the kingdom was left to his nephew Baldwin V, whom he had crowned as co-king in 1183. Raymond III of Tripoli again served as regent. The following year, Baldwin V died before his ninth birthday, and his mother Princess Sybilla, sister of Baldwin IV, crowned herself queen and her husband, Guy of Lusignan, king.
It was at this time that Raynald, once again, raided a rich caravan and had its travelers thrown in his prison. Saladin demanded that the prisoners and their cargo be released. The newly crowned King Guy appealed to Raynald to give in to Saladin's demands, but Raynald refused to follow the king's orders.
It was this final act of outrage by Raynald which gave Saladin the opportunity he needed to take the offensive against the kingdom. He laid siege to the city of Tiberias in 1187. Raymond advised patience, but King Guy, acting on advice from Raynald, marched his army to the Horns of Hattin outside of Tiberias.
The Crusader army, thirsty and demoralized, was destroyed in the ensuing battle. King Guy and Raynald were brought to Saladin's tent, where Guy was offered a goblet of water. Guy took a drink but was forbidden to pass the goblet to Raynald, because the Muslim rule of hospitality states that one who receives food or drink is under the protection of the host, and that anyone in need of water should be given an adequate amount. Saladin would not be forced to protect the treacherous Raynald by allowing him to drink. Raynald, who had not had a drop of water in days, grabbed the goblet out of Guy's hands. Upon seeing Raynald's disrespect for Muslim custom, Saladin beheaded Raynald for past betrayals. Saladin honored tradition with King Guy; Guy was sent to Damascus and eventually ransomed to his people, one of the few captive crusaders to avoid execution.
By the end of the year, Saladin had taken Acre and Jerusalem. Pope Urban III is said to have collapsed and died upon hearing the news. However, at the time of his death, the news of the fall of Jerusalem could not yet have reached him, although he knew of the battle of Hattin and the fall of Acre.
The Byzantine Emperor Isaac II Angelus made a secret alliance with Saladin to impede Frederick's progress in exchange for his empire's safety. On May 18, 1190, the German army captured Iconium, the capital of the Sultanate of Rüm. However, on June 10, 1190, Frederick was thrown from his horse in the crossing of the Saleph River and drowned. After this, much of his army returned to Germany. His son Frederick of Swabia led the remaining 5,000 men to Antioch. There, the emperor's body was boiled to remove the flesh, which was interred in the Church of St. Peter; his bones were put in a bag to continue the crusade. In Antioch, however, the German army was further reduced by fever. Young Frederick had to ask the assistance of his kinsman Conrad of Montferrat to lead him safely to Acre, by way of Tyre, where his father's bones were buried.
William II of Sicily had died the previous year, and was replaced by Tancred, who placed Joan of England—William's wife and Richard's sister—in prison. Richard captured the capital city of Messina on October 4, 1190 and Joan was released. Richard and Philip fell out over the issue of Richard's marriage, as Richard had decided to marry Berengaria of Navarre, breaking off his long-standing betrothal to Philip's half-sister Alys. Philip left Sicily directly for the Middle East on March 30, 1191, and arrived in Tyre in mid-May. He joined the siege of Acre on May 20. Richard did not set off from Sicily until April 10.
Shortly after setting sail from Sicily, Richard's armada of 100 ships (carrying 8,000 men) was struck by a violent storm. Several ships ran aground, including one holding Joan, his new fiancée Berengaria, and a large amount of treasure that had been amassed for the crusade. It was soon discovered that Isaac Dukas Comnenus of Cyprus had seized the treasure. The young women were unharmed. Richard entered Limassol on May 6, and met with Isaac, who agreed to return Richard's belongings and send 500 of his soldiers to the Holy Land. Once back at his fortress of Famagusta, Isaac broke his oath of hospitality and began issuing orders for Richard to leave the island. Isaac's arrogance prompted Richard to conquer the island within days.
King Guy was released from prison by Saladin in 1189. He attempted to take command of the Christian forces at Tyre, but Conrad of Montferrat held power there after his successful defence of the city from Muslim attacks. Guy turned his attention to the wealthy port of Acre. He amassed an army to besiege the city and received aid from Philip's newly-arrived French army. However, it was still not enough to counter Saladin's force, which besieged the besiegers. In summer 1190, in one of the numerous outbreaks of disease in the camp, Queen Sibylla and her young daughters died. Guy, although only king by right of marriage, endeavoured to retain his crown, although the rightful heir was Sibylla's half-sister Isabella. After a hastily arranged divorce from Humphrey IV of Toron, Isabella was married to Conrad of Montferrat, who claimed the kingship in her name.
During the winter of 1190-91, there were further outbreaks of dysentery and fever, which claimed the lives of Frederick of Swabia, Patriarch Heraclius of Jerusalem, and Theobald V of Blois. When the sailing season began again in spring 1191, Leopold V of Austria arrived and took command of what remained of the imperial forces. Philip of France arrived with his troops from Sicily in May.
Richard, Philip, and Leopold quarrelled over the spoils of their victory. Richard cast down the German standard from the city, slighting Leopold. Also, in the struggle for the kingship of Jerusalem, Richard supported Guy, while Philip and Leopold supported Conrad, who was related to them both. It was decided that Guy would continue to rule, but that Conrad would receive the crown upon his death.
Frustrated with Richard (and in Philip's case, in poor health), Philip and Leopold took their armies and left the Holy Land in August. Philip left 10,000 French crusaders in the Holy Land and 5,000 silver marks to pay them.
When it became apparent that Saladin was not willing to pay the terms of the treaty at Acre, Richard had 2700 Muslim prisoners executed on August 20 outside of Acre in full view of Saladin's camp.
After the capture of Acre, Richard decided to march to the city of Jaffa, where he could launch an attack on Jerusalem but on September 7, 1191, at Arsuf, north of Jaffa, Saladin attacked Richard's army.
Saladin attempted to lure Richard's forces out to be easily picked off, but Richard maintained his formation until the Hospitallers rushed in to take Saladin's right flank, while the Templars took the left. Richard then won the battle.
Richard called on Conrad to join him on campaign, but he refused, citing Richard's alliance with King Guy. He too had been negotiating with Saladin, as a defence against any attempt by Richard to wrest Tyre from him for Guy. However, in April, Richard was forced to accept Conrad as king of Jerusalem after an election by the nobles of the kingdom. Guy had received no votes at all, but Richard sold him Cyprus as compensation. Before he could be crowned, Conrad was stabbed to death by two Hashshashin in the streets of Tyre. Eight days later, Richard's nephew Henry II of Champagne married Queen Isabella, who was pregnant with Conrad's child. It was strongly suspected that the king's killers had acted on instructions from Richard.
In July 1192, Saladin's army suddenly attacked and captured Jaffa with thousands of men, but Saladin had lost control of his army because of their anger for the massacre at Acre. It was believed that Saladin even told the Crusaders to shield themselves in the Citadel until he had regained control of his army. Later, Richard had arrived in ships, but did not land because he did not know the situation, until a priest swam to the ship and told him what happened. The city was then re-captured by Richard and a much smaller force of 55 men on July 31. A final battle was fought on August 5 in which Richard once again emerged triumphant.
On September 2, 1192, Richard and Saladin finalized a treaty by which Jerusalem would remain under Muslim control, but which also allowed unarmed Christian pilgrims to visit the city. Richard departed the Holy Land on October 9.
In 1193, Saladin died, leaving behind only one piece of gold and forty-seven pieces of silver; he had given the rest away to charity.
Henry of Champagne was killed in an accidental fall in 1197. Queen Isabella then married for a fourth time, to Amalric of Lusignan, who had succeeded his brother Guy, positioned as King of Cyprus. After their deaths in 1205, her eldest daughter Maria of Montferrat (born after her father's murder) succeeded to the throne of Jerusalem.
The failure of the Third Crusade would lead to the call for a Fourth Crusade six years after the third ended in 1192.
Accounts of events surrounding the Third Crusade were written by the anonymous authors of the Itinerarium Peregrinorum et Gesta Regis Ricardi, the Old French Continuation of William of Tyre (parts of which are attributed to Ernoul), and by Ambroise, Roger of Howden, Ralph of Diceto, and Giraldus Cambrensis.