The foundation of Kairouan dates to about the year 670 when the Arab general Uqba ibn Nafi of Amir Muauia selected a site in the middle of a dense forest, then infested with wild beasts and reptiles, as the location of a military post for the conquest of the West. Formerly, the city of Kamounia was located where Kairouan now stands. It had housed a Byzantine garrison before the Arab conquest, and stood far from the sea - safe from the continued attacks of the Berbers who had fiercely resisted the Arab invasion. Berber resistance continued, led first by Kusaila, whose troops killed Uqba at Biskra about fifteen years after the establishment of the military post, and then by a Berber woman called Al-Kahina who was killed and her army defeated in 702. Subsequently, there occurred a mass conversion of the Berbers to Islam. Kharijites or Islamic "outsiders" who formed an egalitarian and puritanical sect appeared and are still present on the island of Djerba. In 745, Kharijite Berbers captured Kairouan, which was already at that time a developed city with luxuriant gardens and olive groves.

Power struggles continued until Ibrahim ibn al-Aghlab recaptured Kairouan at the end of the 8th century. In 800 Caliph Harun ar-Rashid in Baghdad confirmed Ibrahim as Emir and hereditary ruler of Ifriqiya. Ibrahim ibn al-Aghlab founded the Aghlabid dynasty which ruled Ifriqiya between 800 and 909. The new Emirs embellished Kairouan and made it their capital. It soon became famous for its wealth and prosperity, reaching the levels of Basra and Kufa and giving Tunisia one of its golden ages long sought after the glorious days of Carthage.

The Aghlabites built the great mosque and established in it a university that was a centre of education both in Islamic thought and in the secular sciences. Its role can be compared to that of the University of Paris in the Middle Ages. In the 9th century, the city became a brilliant focus of Arab and Islamic cultures attracting scholars from all over the Islamic World. In that period Imam Sahnun and Asad ibn al-Furat made of Kairouan a temple of knowledge and a magnificent centre of diffusion of Islamic sciences. The Aghlabids also built palaces, fortifications and fine waterworks of which only the pools remain. From Kairouan envoys from Charlemagne and the Holy Roman Empire returned with glowing reports of the Aghlabites palaces, libraries and gardens – and from the crippling taxation imposed to pay for their drunkenness and sundry debaucheries. The Aghlabite also pacified the country and conquered Sicily in 827.