Year 1168 (MCLXVIII) was a leap year starting on Monday of the Julian calendar.

• Summer – King Amalric I of Jerusalem and Byzantine emperor Manuel I Komnenos negotiate an alliance against Fatimid-Egypt. Archbishop William of Tyre is among the ambassadors sent to Constantinople to finalize the treaty.
• Autumn – William IV, Count of Nevers, arrives in Palestine with a contingent of elite knights. In Jerusalem he is present during a council with Amalric and other nobles to decide on an expedition to Egypt.
• October 20 – Amalric I invades Egypt again from Ascalon, sacking Bilbeis and threatening Cairo. In November, a Crusader fleet sails up the Nile and arrives in Lake Manzala, sacking the town of Tanis.^[1]
• Nur al-Din, Zangid ruler (atabeg) of Aleppo, sends an expedition under General Shirkuh to Egypt on request of the Fatimid caliph Al-Adid. He offers him a third of the land, and fiefs for his generals.^[1]

• December 22 – Afraid that the Egyptian capital Fustat (modern-day Old Cairo) will be captured by Crusader forces, its Fatimid vizier, Shawar, orders the city set afire. The capital burns for 54 days.

• March 27 – Patrick of Salisbury, Angevin governor of Poitou, is killed in an ambush at Poitiers by French forces under Guy of Lusignan. He is escorting Queen Eleanor of Aquitaine on a journey near the border of Aquitaine. Patrick's nephew, William Marshal, is part of the royal escort and is taken prisoner. Later he is ransomed and becomes a member of Eleanor's household.^[2]
• King Valdemar I ("the Great") of Denmark conquers the Wendish capital at Arkona on the island of Rügen (modern Germany). The Wends become Christians and subject to Danish suzerainty.
• Henry the Lion, duke of Saxony, marries the 12-year-old Matilda (or Maud), daughter of King Henry II of England.^[3]
• The newly born Commune of Rome conquers and destroys the rival neighboring city of Albano (modern Italy).^[4]
• Stephen du Perche, Sicilian chancellor, is accused of plotting to claim the throne and is forced to flee.

• April 9 – Emperor Rokujō of Japan is deposed by his grandfather, retired-Emperor Go-Shirakawa, after an 8-month reign. He is succeeded by his 6-year-old uncle, Takakura, as the 80th emperor.
• Yuanqu County (also known as Wanting County) in China is destroyed by a flood of the Yellow River.

• September 20 – Antipope Paschal III dies at Rome after a 4-year reign. Giovanni di Struma is elected as his successor and will reign as Antipope Callixtus III with support from Emperor Frederick I.

• April 22 – Abubakar ibn Gussom, Arab poet (d. 1242)
• August 31 – Emperor Zhangzong of Jin, Chinese ruler (d. 1208)
• November 19 – Emperor Ningzong, Chinese ruler (d. 1224)
• Ibn Muti al-Zawawi, Arab jurist and philologian (d. 1231)
• Robert of Braybrooke, English High Sheriff (d. 1210)
• Robert of Courtenay, Lord of Champignelles, French nobleman and knight (d. 1239)
• Temüge (or Otgon), brother of Genghis Khan (d. 1246)
• William de Ferrers, 4th Earl of Derby (approximate date)

• January 17 – Thierry of Alsace, count of Flanders (b. 1099)
• March 27 – Patrick of Salisbury, Norman nobleman (b. 1122)
• April 5 – Robert de Beaumont, English nobleman (b. 1104)
• September 20 – Paschal III, antipope of Rome (b. 1110)
• October 24 – William IV, count of Auxerre and Nevers
• November 5 – Hugh IX of Lusignan, French nobleman
• Abu al-Najib Suhrawardi, Persian scholar (b. 1097)
• Bermudo Pérez de Traba, Spanish nobleman (b. 1088)
• Conrad of Babenberg, archbishop of Salzburg (b. 1115)
• Wivina, French Benedictine abbess and saint (b. 1103)