October 2, 1187
Saladin captures Jerusalem from the Crusaders. Following a siege of Jerusalem that began on September 20, the city falls to Saladin, the Sultan of Egypt and the founder of the Ayyubid dynasty. Saladin had seized control in Syria in 1174 following the death of its ruler Nur al-Din and began to pose a challenge to the crusaders who were in Syria and the Land of Israel. In 1187, together with 12,000 horsemen, he began his offensive, first capturing Tiberias and Hattin before Jerusalem. After the victory in Jerusalem, Saladin’s advances were halted. He would eventually sign a treaty with Richard the Lionhearted which would divide the land of Israel between the crusaders who kept the coastal region and the Ayyubid who controlled Jerusalem and the interior.
Unlike the crusaders who had barred Jews from living in Jerusalem, Saladin was tolerant towards his Jewish subjects. Under his rule, they were welcomed back into Jerusalem in 1190.
The image above is of Bailin of Ibelin surrendering Jerusalem to Saladin.
University has a description of the siege and battle as part of its Internet Medieval Source Book