Ah I’m glad you asked again - I remember you asked this question a month ago, but I didn’t get a chance to respond to it the first time.

The story usually goes as follows:

“…the majority of Muslims essentially forgot about the Crusades, and their interest in them was only re-awakened in the nineteenth century, as a result of increasing encounters with the European colonial powers. According to this narrative, two figures from the period did remain prominent after the demise of the crusader states: Nur al-Din and al-Zahir Baybars; Nur al-Din was remembered by the religious classes as the mujahid par excellence, while Baybars became the hero of a hugely popular folk epic. Notably absent was Saladin, who was regarded by modern scholars as having been forgotten in the Middle East until he was re-introduced into the Muslim world as a result of the renown that he had achieved in the West, especially in the eyes of politicians such as Kaiser Wilhelm II, who visited the sultan’s tomb in 1898 and publicly described how famous the sultan was in Europe.” (Christie, pg. 113)

In this view, Saladin defeated the crusaders and took back Jerusalem, but did not expel them entirely, so he wasn’t such a great hero after all; it was Baybars who finally drove them from the mainland in 1291. Saladin was also a Kurd, not an Arab or Turk, and therefore not someone the Ottomans (or later, Arab nationalists) would want to emphasize, unlike Baybars, who was a Turk. Saladin was remembered more in the west because he defeated the Third Crusade, which was a crusade of kings (Richard I, Philip II, Frederick I), and the loss of Jerusalem to Saladin was more devastating for Western Europe than the loss of Acre was 100 years later. Saladin had a modest tomb in Damascus, but Europeans kept visiting it and were disappointed, so the Ottomans built a much more ornate one. The German emperor Wilhelm II visited the new tomb in 1898, and also made a pilgrimage to Jerusalem dressed as a crusader. The Muslim world was now more aware of the importance Europeans placed on Saladin and Jerusalem. The Ottomans knew that Western powers were trying to carve up the empire, and Saladin came to be remembered for his victory over Europeans who, likewise, had tried to carve up Muslim territory.

But is that really true? Probably not:

“Saladin remained very much alive in the historical imagination of Arabs and Muslims, and never receded into obscurity. Histories and literary tests from the Mamluk and Ottoman periods that contain in them accounts of the crusader era attest to Saladin’s continued presence. Saladin was also a figure that inhabited the popular memories of Arab Muslims, and not just the rarified world of the ‘ulama’ (religious scholars) who composed those Mamluk and Ottoman works.” (Abouali, pg. 175)

There was a well-known epic poem about Baybars that was frequently performed for the public, even up to the 19th century, which certainly helped his reputation. Europeans knew about that, but they were perhaps less familiar with all the other Mamluk- and Ottoman-era histories and literature that mentioned Saladin, so they assumed that Muslims had forgotten about him. A lot of this is probably also simple Eurocentric orientalism. The superior West thought Saladin was the big hero, so the Muslims must be too dumb to recognize their own history. Europeans had to re-introduce Saladin to his proper place in history. Even if he had been forgotten, why would this necessarily need to be “corrected”? What if the Muslims already correctly understood the merits of Saladin and Baybars, and it was the West who incorrectly overemphasized Saladin? Why should Saladin be remembered over anyone else? But of course 19th-century Europeans would never have conceived of these possibilities.

The Eurocentric viewpoint is pretty handily dismantled in Abouali’s article, which discusses all sorts of other evidence that Saladin was never actually forgotten in the first place.

Sources:

Diana Abouali, “Saladin's Legacy in the Middle East before the Nineteenth Century,” in Crusades 10 (2011)

Niall Christie, Muslims and Crusaders: Christianity's Wars in the Middle East, 1095-1382, from the Islamic Sources (Routledge, 2014)

Jonathan Phillips, The Life and Legend of the Sultan Saladin (Yale University Press, 2019)

For the older view that Saladin, and the crusades in general, were forgotten in the Muslim world, see:

Carole Hillenbrand, The Crusades: Islamic Perspectives (Routledge, 1999)

Thomas Madden, The New Concise History of the Crusades (Rowman and Littlefield, 2005)

Jonathan Riley-Smith, The Crusades, Christianity and Islam (Columbia University Press, 2011)

Jonathan Riley-Smith, The Crusades: A History, 3rd ed. (Bloomsbury, 2014)

(Side note, I remember hearing Riley-Smith talk about this at the very first conference I went to, which seems like a long long time ago, but was actually fairly recent, in 2006. It was just always sort of taken for granted among crusade historians.)

In the parts of the Islamic world where Salah al-Din (Saladin) ruled (Egypt and the Levant) he has remained a prominent historical figure. Even in Egypt (which he technically ruled but reportedly didn’t like that much—he technically ruled Egypt for 22 years but was in the country for less than seven of them) people refer to the Cairo Citadel as “Saladin’s castle,” even though there’s almost nothing there today that dates back that far.

As for the rest of the Islamic world — there’s no particular reason that someone in Morocco or Central Asia would have found him relevant unless they were interested in history writ large, the same way someone in Kansas in 1900 would have regarded an early King of England or France (or, say, Pope Urban VI). This is also largely due to the lack of standardized education for the majority of people. The stories that were told would reflect what was important in a particular area, and the Crusades themselves were kind of limited geographically to an area that wasn’t politically that important in the grand scheme of things. Until the age of European imperialism, the Crusades were not seen as a momentous event in the Middle East like they were in Europe. (They were basically considered an annoying episode in which invaders came, stayed a while, and left. This is a common and recurring story through the Islamic world.)

In the 20th century Salah al-Din’s story became much more widespread through popular media: the Egyptian film about him is considered a classic of Arabic cinema. And, of course, the mythos that he was the man who “repelled the crusaders” has figured somewhat heavily in the jihadist movement, although this is a heavily modern interpretation (analogous to the revival of the Crusader ideology among white supremacists in Europe and North America).