Islam arose out of a cataclysmic change in society and economics in the Arabian Peninsula during the early seventh century. The adherents of the new religion immediately launched a campaign against the Byzantine Empire, the military, cultural and economic superpower of the age. In the course of just a few years the Arabs had conquered the valuable territories of modern day Palestine, Syria, Jordan and Lebanon from the Byzantines who in turn withdrew to Anatolia after great losses. This was the first encounter between Islamic and Christian people and the aftermath set the stage for the Islamic conquest of North Africa, the Crusades and many other historical conflicts. The paper seeks to answer the question "Why did the Byzantine Empire fail in the defense of these territories" by looking at diplomatic, military, economic and social differences between the Arab and Byzantine sides. The research is based on a variety of secondary sources and several translated primary sources. The conclusion is that the Byzantines failed to recognize and address the great social changes that were taking place in the contested region while the Arabs expertly exploited the dynamic situation.