"Glory to He (God) Who did take His servant for a Journey by night from the Sacred Mosque to the farthest Mosque (al- masjid al aqsa), whose precincts We did bless" - Sura 17:1 This is the famous reference to "al-aqsa". That the reference was to the Jerusalem open space place of prayer ("mosque" in Arabic of the time) is clear, because in the Hadith (Islamic early traditions) Muhammad's widow tells of his night journey and refers to the place as Ilia (Capitolina, Jerusalem's name at the time). Also, already in the 7th century, not many years after, the al-Aqsa mosque was built in commemoration of the dream-event. Why would Muhammad refer to the place as the "farthest north"?Let us take a look at Psalm 48:2, "Mount Zion, in the far north, the city of the great King". Everybody knows, and knew, that Jerusalem is not in the far north. In fact, it was in the middle of the country! But Canaanite mythology had their gods living on Mount Zaphon (North) near Turkey. The reverence towards the north was inherited by the Israelites and so was applied to Jerusalem. Muhammad picked it up, and the rest is history.
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from the article: U.S. warns Israel, Palestinians: Avoid inflammatory actions in Jerusalem