Throughout the twentieth century Arabs and Muslims have been negatively stereotyped--indeed, vilified--in American cinema. Jack Shaheen has convincingly documented this in his filmography Reel Bad Arabs (Shaheen 2001). However, in 1999 there appeared two major mainstream American movies--The Thirteenth Warrior and Three Kings--with positive Arab and Muslim major characters. Positive characterizations of Middle Easterners have continued to appear, despite the terrorist incidents of 9/11, American wars against Afghanistan and Iraq, and a continuing backlash against Middle Easterners and Muslims in the U.S. Notable examples of such films include Syriana (2005), Kingdom of Heaven (2005), and Body of Lies (2009). What accounts for this counterintuitive trend of positive cinematic representations? The paper first documents the phenomenon, discussing major films about Arabs and Muslims between 1999 and the present. It divides the films into analytic categories of "positive," "neutral" and "negative," with positives outweighing negatives. Admittedly, not all films fit neatly into these three categories. An ambivalent category is anti-war films and films about the negative effects of war on the U.S., in which Middle Easterners are merely incidental victims; examples are Jarhead (2005), In the Valley of Elah (2007), and Stop Loss (2008). Another analytical problem is that some movies about Middle Easterners have been interpreted as positive by some viewers but negative (even Neo-Orientalist) by others; examples discussed are The Four Feathers (2002), The Kingdom (2007) and The Kite Runner (2007). Some anti-Arab and anti-Muslim films continue to be made in Hollywood, but there has been a movement away from Orientalism, toward fairness and complexity. This paper discusses possible reasons for this trend, offering a theory of cinematic "rehabilitation" of American minority groups. The paper argues that Arabs and Muslims are perhaps following in the footsteps of groups such as Native Americans, Blacks, Russians and Asians, who at first were vilified but gradually came to acquire cinematic respectability.