Born David Neustadt in Haifa, he grew up in Zichron Ya'akov and Rosh Pinna.
After completing secondary school in Haifa, Ayalon went in 1933 to study at the recently founded Hebrew University in Jerusalem.
Despite service in the British Army during World War II, he gained his PhD in 1946 under the supervision of Leo Aryeh Mayer.
A notable work late in Ayalon's career was Eunuchs, Caliphs and Sultans.
He was survived by his wife, Professor Myriam Rosen-Ayalon of Hebrew University, a leading authority on Islamic art and archeology.