Between 1176 and 1187, the Ayyubid sultan Saladin conquered most of the Crusader states in the Levant. Jerusalem was lost to the Ayyubids following the siege of Jerusalem in 1187. The Third Crusade (1189–1192) was launched in response to the fall of Jerusalem, with the goal of recovering the city. It successfully reclaimed an extensive territory, effectively reestablishing the Kingdom of Jerusalem. Although Jerusalem itself was not recovered, the important coastal towns of Acre and Jaffa were. On 2 September 1192, the Treaty of Jaffa was signed with Saladin, bringing the crusade to an end. The truce would last for three years and eight months.

Saladin died on 4 March 1193, before the expiration of the truce, and his empire was contested and divided between three of his sons and two of his brothers. The new ruler of the Kingdom of Jerusalem, Henry II of Champagne, signed an extension of the truce with Egyptian Sultan al-Aziz Uthman. In 1197, Henry died and was succeeded by Aimery of Cyprus, who signed a truce with al-Adil of five years and eight months on 1 July 1198.

Pope Innocent III succeeded to the papacy in January 1198, and the preaching of a new crusade became the prime goal of his pontificate, expounded in his bull Post miserabile. His call was largely ignored by the European monarchs: the Germans were struggling against Papal power, and England and France were still engaged in warfare against each other.;

Due to the preaching of Fulk of Neuilly, a crusading army was finally organised at a tournament held at Écry-sur-Aisne by Count Thibaut of Champagne in 1199. Thibaut was elected leader, but he died in 1201 and was replaced by Boniface of Montferrat.

Boniface and the other leaders sent envoys to Venice, Genoa, and other city-states in 1200 to negotiate a contract for transport to Egypt, the stated objective of their crusade. Earlier crusades focused on Palestine had involved the slow movement of large and disorganised land hosts across a generally hostile Anatolia. Egypt was now the dominant Muslim power in the eastern Mediterranean but also a major trading partner of Venice. An attack on Egypt would clearly be a maritime enterprise, requiring the creation of a fleet. Genoa was uninterested, but in March 1201 negotiations were opened with Venice, which agreed to transport 33,500 crusaders, a very ambitious number. This agreement required a full year of preparation on the part of the Venetians to build numerous ships and train the sailors who would man them, all the while curtailing the city's commercial activities.;

By May 1202, the bulk of the crusader army was collected at Venice, although with far smaller numbers than expected: about 12,000 (4–5,000 knights and 8,000 foot soldiers) instead of 33,500. The Venetians had performed their part of the agreement: there awaited 50 war galleys and 450 transports – enough for three times the assembled army. The Venetians, under their aged and blind Doge Dandolo, would not let the crusaders leave without paying the full amount agreed to, originally 85,000 silver marks. The crusaders could only initially pay 35,000 silver marks. Dandolo and the Venetians considered what to do with the crusade. Dandolo proposed that the crusaders pay their debts by intimidating many of the local ports and towns down the Adriatic, culminating in an attack on the port of Zara in Dalmatia.

The siege of Zara or siege of Zadar was the first major action of the Fourth Crusade and the first attack against a Catholic city by Catholic crusaders. The crusaders had an agreement with Venice for transport across the sea, but the price far exceeded what they were able to pay. Venice set the condition that the crusaders help them capture Zadar (or Zara), a constant battleground between Venice on one side and Croatia and Hungary on the other, whose king, Emeric, pledged himself to join the Crusade. Although some of the crusaders refused to take part in the siege, the attack on Zadar began in November 1202 despite letters from Pope Innocent III forbidding such an action and threatening excommunication. Zadar fell on 24 November and the Venetians and the crusaders sacked the city. After wintering in Zadar, the Fourth Crusade continued its campaign, which led to the siege of Constantinople.

Alexios IV offered to pay the entire debt owed to the Venetians, give 200,000 silver marks to the crusaders, 10,000 Byzantine professional troops for the Crusade, the maintenance of 500 knights in the Holy Land, the service of the Byzantine navy to transport the Crusader Army to Egypt, and the placement of the Eastern Orthodox Church under the authority of the Pope, if they would sail to Byzantium and topple the reigning emperor Alexios III Angelos, brother of Isaac II. This offer, tempting for an enterprise that was short on funds, reached the leaders of the Crusade on 1 January 1203 as they wintered at Zara. Count Boniface agreed and Alexios IV returned with the Marquess to rejoin the fleet at Corfu after it had sailed from Zara. Most of the rest of the crusade's leaders, encouraged by bribes from Dandolo, eventually accepted the plan as well. However, there were dissenters. Led by Renaud of Montmirail, those who refused to take part in the scheme to attack Constantinople sailed on to Syria. The remaining fleet of 60 war galleys, 100 horse transports, and 50 large transports (the entire fleet was manned by 10,000 Venetian oarsmen and marines) sailed in late April 1203. In addition, 300 siege engines were brought along on board the fleet. Hearing of their decision, the Pope hedged and issued an order against any more attacks on Christians unless they were actively hindering the Crusader cause, but he did not condemn the scheme outright.

The siege of Constantinople in 1203 was a Crusader siege of the capital of the Byzantine Empire, in support of the deposed emperor Isaac II Angelos and his son Alexios IV Angelos. It marked the main outcome of the Fourth Crusade.

To take the city by force, the Crusaders first needed to cross the Bosphorus. About 200 ships, horse transports and galleys would undertake to deliver the crusading army across the narrow strait, where Alexios III had lined up the Byzantine army in battle formation along the shore, north of the suburb of Galata. The Crusaders' knights charged straight out of the horse transports, and the Byzantine army fled south. The Crusaders followed south, and attacked the Tower of Galata, which held one end of the chain that blocked access to the Golden Horn. The Tower of Galata held a garrison of mercenary troops of English, Danish, and Italian origin. As the crusaders laid siege to the Tower, the defenders routinely attempted to sally out with some limited success, but often suffered bloody losses. On one occasion the defenders sallied out but were unable to retreat back to the safety of the tower in time, the Crusader forces viciously counterattacked, with most of the defenders being cut down or drowning in the Bosporus in their attempts to escape. The Golden Horn now lay open to the Crusaders, and the Venetian fleet entered.

The sack of Constantinople occurred in April 1204 and marked the culmination of the Fourth Crusade. Crusader armies captured, looted, and destroyed parts of Constantinople, then the capital of the Byzantine Empire. After the capture of the city, the Latin Empire (known to the Byzantines as the Frankokratia or the Latin Occupation) was established and Baldwin of Flanders was crowned Emperor Baldwin I of Constantinople in the Hagia Sophia.

After the city's sacking, most of the Byzantine Empire's territories were divided up among the Crusaders. Byzantine aristocrats also established a number of small independent splinter states, one of them being the Empire of Nicaea, which would eventually recapture Constantinople in 1261 and proclaim the reinstatement of the Empire.

The sack of Constantinople is a major turning point in medieval history. The Crusaders' decision to attack the world's largest Christian city was unprecedented and immediately controversial. Reports of Crusader looting and brutality scandalised and horrified the Orthodox world; relations between the Catholic and Orthodox churches were catastrophically wounded for many centuries afterwards, and would not be substantially repaired until modern times.

According to the Partitio terrarum imperii Romaniae, the empire was apportioned between Venice and the leaders of the crusade, and the Latin Empire of Constantinople was established. Baldwin of Flanders on the was made emperor. Boniface went on to found the Kingdom of Thessalonica, a vassal state of the new Latin Empire. The Venetians also founded the Duchy of the Archipelago in the Aegean Sea. Meanwhile, Byzantine refugees founded their own rump states, the most notable of these being the Empire of Nicaea under Theodore Laskaris (a relative of Alexios III), the Empire of Trebizond, and the Despotate of Epirus.

The Latin Empire was soon faced with a number of enemies. Besides the individual Byzantine rump states in Epirus and Nicaea, and the also Christian Bulgarian Empire, there was also the Seljuk Sultanate. The Greek states fought for supremacy against both the Latins and each other.

The conquest of Constantinople was followed by the fragmentation of the Byzantine Empire into three states centered in Nicaea, Trebizond and Epirus. The Crusaders then founded several new Crusader states, known as Frankokratia, in former Byzantine territory, largely hinged upon the Latin Empire of Constantinople. The presence of the Latin Crusader states almost immediately led to war with the Byzantine successor states and with the Bulgarian Empire. The Nicaean Empire eventually recovered Constantinople and restored the Byzantine Empire in 1261.

The Fourth Crusade is considered to have solidified the East–West Schism. The crusade dealt an irrevocable blow to the Byzantine Empire, contributing to its decline and fall.