Meanwhile the war with Ulalrich continued, but after his victory at Weissensee Henry's allies began to fall away, and his cause to decline. When Frederick took the field in June 1181 the struggle was soon over. Henry sought for peace, and the conditions were settled at Erfurt in November 1181, when he was granted the counties of Lüneburg and Brunswick, but was banished under oath not to return without the emperor's permission. In July 1182 he went to his father-in-law's court in Normandy, and afterwards to England, returning to Germany with Frederick's permission in 1185. He was soon regarded once more as a menace to the peace of Germany, and of the three alternatives presented to him by the emperor in 1188 he rejected the idea of making a formal renunciation of his claim, or of participating in the crusade, and chose exile, going again to England in 1189. In October of the same year, however, he returned to Saxony, excusing himself by asserting that his lands had not been defended according to the emperor's promise. He found many allies, took Lübeck, and soon almost the whole of Saxony was in his power. King Henry VI. was obliged to take the field against him, after which the duke's cause declined, and in July 1190 a peace was arranged at Fulda, by which he retained Brunswick and Lüneburg, received half the revenues of Lübeck, and gave two of his sons as hostages. Still hoping to regain his former position, he took advantage of a league against Henry VI. in 1193 to engage in a further revolt; but the captivity of his brother-in-law Richard I., king of England, led to a reconciliation. Henry passed his later years mainly at his castle of Brunswick, where he died on the 6th of August 1195, and was buried in the church of St Blasius which he had founded in the town. He had by his first wife a son and a daughter, and by his second wife five sons and a daughter. One of his sons was Otto, afterwards the emperor Otto IV., and another was Henry (d. 1227) count palatine of the Rhine.
Henry was a man of great ambition, and won his surname of "Lion" by his personal bravery. His influence on the fortunes of Saxony and northern Germany was very considerable. He planted Flemish and Dutch settlers in the land between the Elbe and the Oder, fostered the growth and trade of Lübeck, and in other ways encouraged trade and agriculture. He sought to spread Christianity by introducing the Cistercians, founding bishoprics, and building churches and monasteries. In 1874 a colossal statue was erected to his memory at Brunswick.