The city reached its peak in the 12th century, with a population of approximately 200,000.It was the center of administrative power in Egypt, until it was ordered burned in 1168 by its own vizier, Shawar, to keep its wealth out of the hands of the invading Crusaders. The remains of the city were eventually absorbed by nearby Cairo, which had been built to the north of Fustat in 969 when the Fatimid conquered the region and created a new city as a royal enclosure for the Caliph. The area then fell into disrepair for hundreds of years and was used as a garbage dump.

Today, Fustat is part of Old Cairo, with few buildings remaining from its days as capital, though there have been many archaeological digs which have taken advantage of the wealth of buried material in the area.Many ancient items recovered from the site are on display in Cairo's Museum of Islamic Art.

Fustat grew into a series of tribal areas, khittas,around the central mosque and administrative buildings.The majority of the settlers came from Yemen, with the next largest grouping from western Arabia,along with some Jews and Roman mercenaries. Arabic was generally the primary spoken dialect in Egypt, and was the language of written communication, though Coptic was still spoken in Fustat in the 8th century.

Fustat was the center of power in Egypt under the Umayyad dynasty, which had started with the rule of Muawiyah I , and headed the Islamic caliphate from 660 to 750. However, Egypt itself was considered only a province of larger powers, and was ruled by governors who were appointed from other Muslim centers such as Damascus, Medina, and Baghdad. The city was still a major one though, and in the 9th century, it had a population of approximately120,000.But when General Gawhar  of the Tunisian-based Fatimid’s captured the region, this launched a new era when Egypt was the center of its own power. Gawhar founded a new city just north of Fustat on August 8, 969, naming it Al Qahira (Cairo),and in 971, the Fatimid Caliph al-Mo’ezz al- moved his court from al –Mansuryia al-Mansuryia  in Tunisia to the new city that Gawhar founded. But Cairo was not intended as a center of government at the time—it stayed primarily as the royal enclosure for the Caliph and his court and army,while Fustat remained the capital in terms of economic and administrative power. The city thrived and grew, and in 987, the geographer Ibn Hawkal wrote that al-Fustat was approximately one third the size of Baghdad. By 1168, it had a population of 200,000.

Today, little remains of the grandeur of the old city. The three capitals, Fustat, Al-Askar and Al-Qatta’I were absorbed into the growing city of Cairo. Some of the old buildings remain visible in the region known as"Old Cairo", but much of the rest has fallen into disrepair,overgrown with weeds or used as garbage dumps.