How did the Prophet deal with the Jews during his stay in Medinah?
Abu Huraira (may God be pleased with him) narrated that once a Muslim and a Jew quarreled and the Muslim said: "By He Who gave superiority to Muhammad over all the people!" The Jew said, "By He Who gave superiority to Moses over all the people!' Upon this, the Muslim lifted his hand to slap the Jew. The Jew went to the Messenger of God (peace and blessings be upon him) and informed him of all that had happened between him and the Muslim. The Prophet (peace and blessings be upon him) said, "Do not give me superiority over Moses, for the people will fall unconscious on the Day of Resurrection and I will be one of them, but I will be the first to regain consciousness and will see Moses standing and holding the side of the Throne. I will not know whether he was one of those who have fallen unconscious and then regained consciousness before me, or if he was one of those exempted by God (from falling unconscious)." This reports says a lot about the kind of peaceful life Muslims and Jews enjoyed in Medina at the time.
2-Also Abdullah Ibn Amr (may God be pleased with him) narrated that the Prophet (peace and blessings be upon him) said: "Whoever kills a person who has a treaty with the Muslims, shall not smell the scent of Paradise though it can be smelled from a distance of forty years."
3-Abu Dauwud recorded, based on the narration of Safwan from a number of Companions of the Messenger of God on the authority of their fathers who were relatives of each other that the Messenger of God (peace and blessings be upon him) said: “Beware, if anyone wrongs a man under the covenant of peace, diminishes his right, forces him to work beyond his capacity, or takes from him anything without his consent, I shall be his adversary on the Day of Judgment.”
4-The noble Prophet (peace and blessings be upon him) has set a good example for us in all matters of life, even in visiting the sick of the People of the Book. Anas (may God be please with him) narrated that a young Jewish boy who served the Prophet (peace and blessings be upon him) once fell ill so the Prophet (peace and blessings be upon him) went to visit him. He sat near his head and asked him to embrace Islam. The boy looked at his father who was present and he told his son obey the Prophet (peace and blessings be upon him). The Prophet (peace and blessings be upon him) then came out of their house saying: "Praise be to God Who saved the boy from hellfire." The hadith proves that there were Jews living with Muslims in peaceful coexistence. The Prophet (peace and blessings be upon him) was keen to treat them well, give them their due rights and fulfill all social obligations towards them in the same way as Muslims without any discrimination against them.
5-It was narrated that during the time of the Prophet (peace and blessings be upon him) some Companions sought to protect a Muslim thief from punishment and brought forward a Jewish man instead as the culprit. Thereupon God the Almighty revealed 6 verses of Surah Al-Nisaa in defense of the right of the Jew, urging people to be just. The verses read: “Indeed, We have revealed to you, [O Muhammad], the Book in truth so you may judge between the people by that which Allah has shown you. And do not be for the deceitful an advocate. And seek forgiveness of Allah. Indeed, Allah is ever Forgiving and Merciful. And do not argue on behalf of those who deceive themselves. Indeed, Allah loves not one who is a habitually sinful deceiver. They conceal [their evil intentions and deeds] from the people, but they cannot conceal [them] from Allah, and He is with them [in His knowledge] when they spend the night in such as He does not accept of speech. And ever is Allah, of what they do, encompassing. Here you are - those who argue on their behalf in [this] worldly life - but who will argue with Allah for them on the Day of Resurrection, or who will [then] be their representative? And whoever does a wrong or wrongs himself but then seeks forgiveness of Allah will find Allah Forgiving and Merciful. And whoever commits a sin only earns it against himself. And Allah is ever Knowing and Wise. But whoever earns an offense or a sin and then blames it on an innocent [person] has taken upon himself a slander and manifest sin” [4: 106-112]
This story paints a clear picture of how Islam has set the foundation of peaceful coexistence based on pillars of justice, harmony and tolerance towards non-Muslims living in a Muslim majority society. Prophet Muhammad (peace and blessings be upon him) founded a civil state ruled by justice, without regard to religion or origins and he himself was just to all, Muslims and non-Muslims alike.
6-Abu Huraira (may God be pleased with him) narrated that although the Messenger of God (peace and blessings be upon him) accepted presents but not alms. And in a different report Wahb Ibn Baqiyyah narrated to us from Khalid from Muhammad Ibn Amr on the authority of Abu Salamah, (and he did not mention the name of Abu Hurayrah) that the Messenger of God (peace and blessings be upon him) accepted presents but not alms. This version adds that a Jewess once presented him at Khaybar with a roasted sheep which she had laced with poison. When the Messenger of God (peace and blessings be upon him) and those who were with him started eating, he suddenly cried: “Take away your hands [from the food], for it has informed me that it is poisoned.” Bishr Ibn Al-Bara Ibn Ma'rur Al-Ansari died from the poison. So he (the Prophet) sent for the Jewess and asked her, “What motivated you to do this?” She said, “If you are indeed a prophet it will not harm you, but if you are a king, I will rid the people of you.” The Messenger of God (peace and blessings be upon him) then ordered that she be killed. He then said: “I continued to feel pain from the mouthful of food which I had eaten at Khaybar.”
The Prophet (peace and blessings be upon him) pardoned the Jewish woman. Her killing was in retaliation for the man who died from eating her poisoned food. The incident, however, did not drive the Prophet (peace and blessings be upon him) to express any feelings of animosity or hatred towards the Jews living in Medina nor did he think of expelling them.
7-Lady Aisha, the Prophet’s wife narrated that the Messenger of God (peace and blessings be upon him) died while his (iron) armor was mortgaged to a Jew for thirty pounds of barley. The Jew who was a wheat trader, did not mind giving barley to the Prophet (peace and blessings be upon him) nor did the Prophet (peace and blessings be upon him) mind mortgaging his armor to the Jew.
All the aforementioned instances narrated from the Sunnah of the Prophet (peace and blessings be upon him) clearly demonstrate that Jews lived as individuals and groups in Medina through its second phase. The Prophet (peace and blessings be upon him) allowed the Jews of Khaybar, the biggest Jewish community, to stay and share in the development of Medina. They were left to cultivate their lands and live peacefully among Muslims.