This research addresses the principle of Islamic tolerance portrayed and manifested during the time of the caliph ‘Umar ibn al- Khattab, in his dealing with Christians of al-Quds (Jerusalem). The primary objective of the research is to substantiate the establishment of such tolerance, particularly in dealing with Christians during Islamic rule in al-Quds. Its aim is also to clarify misconceptions enfolding the principle of tolerance in Islam, expressed by those who are trapped in the modes of excessiveness (ifrat) and laxity (tafrit) in comprehending the idea. The research applies inductive, historical, analytical and critical approach of study. Data from Qur’anic text, Hadith as well as historical facts were gathered and analyzed by extensive consultations of books of tafsir and shuruh al-Hadith (explanations of Hadith), works of contemporary scholars and critical appraisals of historical facts. The research commences with the conceptualization of tolerance in Islam, its justifications in the Qur’an and Sunnah, followed by examples of tolerance and its limitations. The discussion continues by investigating historical milestones related to al-Quds, the status of al-Quds in Islam and Christianity and also encounters between Muslims and Christians of al-Quds beginning from the time of the Prophet until the expansion of Islam during the time of ‘Umar ibn al-Khattab. The research further addresses the conquest of the city by ‘Umar ibn al- Khattab and its causes. It highlights the peace treaty between Muslims and Christians of al-Quds introduced by the Caliph known as the Treaty of ‘Umar which contains, among others, articles related to the rights and duties of two parties. The study also delves into another treaty associated with ‘Umar known as al-Shurut al-‘Umariyyah and suggests that its association with ‘Umar as unsubstantiated. The research findings conclude the tolerance par excellence in relationship between Muslims and non-Muslims with certain provisions, as enshrined in the Qur’an and Sunnah. Tolerance has been established by Muslims upon the expansion of Islam in al-Quds, where the spirit of forbearance and cheer engulfed the Christians upon the arrival of the Muslim’s. The fact was testified even by Christian historians and researchers. Thus, any attempt to relate ‘Umar ibn al- Khattab with maltreatment towards Christians remains groundless.