He fought Muslims in Spain (though contrary to what the 'Song of Roland' would have us believe Roncesvalles was fought against the Basques) and he attempted to form an alliance with the Abbasids (wiki link) The contact seems to have been friendly but a bit inconclusive (seeing how hard it was to get from Aachen to Bagdad that's not really particularly surprising). However Charlemagne did get an elephant out of it.

(sorry for all the wikipedia links, but I found them fairly useful)