The Siege of Jerusalem, from September 20 to October 2, 1187, ended with Saladin's capture of the city from Balian of Ibelin. This event followed Saladin's earlier victories and the capture of key cities, leading to the fall of Jerusalem, a pivotal moment in the Crusades. Despite the city's scarce military presence, its defenders initially repelled Saladin's assaults. Balian negotiated the city's surrender, ensuring safe passage for many inhabitants in exchange for a ransom, contrasting with the earlier Crusader siege in 1099 known for its brutality.

The Kingdom of Jerusalem, already weakened by internal strife and the catastrophic defeat at the Battle of Hattin, saw Saladin's forces swiftly capturing strategic locations. Balian, entering Jerusalem under a promise to Saladin, was persuaded to lead the defense amidst growing desperation. The city, overwhelmed by refugees and lacking sufficient defenders, faced relentless assaults from Saladin's army. Despite breaches, the defenders held on until Balian negotiated terms with Saladin, emphasizing the protection of Christian holy sites and securing the release or safe departure of the city's inhabitants.

Saladin's conquest led to significant changes in Jerusalem's religious landscape. He restored Muslim holy sites, allowed Christian pilgrimages, and displayed tolerance towards different Christian denominations. The city's surrender facilitated the departure of Crusader forces and non-Muslim inhabitants under agreed terms, avoiding widespread slaughter. Saladin's actions post-siege reflected a blend of strategic governance and respect for religious diversity, reinstating Muslim control while permitting Christian access to holy sites.

The fall of Jerusalem prompted the Third Crusade, organized by European monarchs aiming to recapture the city. Despite the Crusaders' efforts, the Kingdom of Jerusalem never fully recovered, shifting its capital to Tyre and later Acre. Saladin's victory at Jerusalem remained a significant episode, illustrating the complexities of medieval warfare, diplomacy, and religious coexistence.