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Greek was the language of government and the ruling elite in Egypt from the Ptolemies (successors to Alexander the Great in the fourth century BC) down to the conquest of Byzantine Egypt by Muslim Arabs in the seventh century AD, around 1000 years.
In 'Empires of the Word: A Language History of the World' by Nicholas Ostler the author considers why some languages of conquerors (e.g. Latin in France & Spain and Arabic in the Middle East) permanently become the language of the conquered country and others (e.g. Turkish in most of the former Ottoman Empire or Russian in Poland) did not.
He thought various factors were important, but two of particular relevance to Egypt included:
Size of population. Egypt (and China) have had long-running linguistic continuity, despite periodic invasions by outsiders, as their fertile river valleys have long sustained such dense populations that an incoming minority of foreign conquerors was more likely to be absorbed into the much larger native population, and eventually adopt their language, than vice versa.
It is easier for a population to adopt a language related in grammar, sounds and vocabulary to the one they previously spoke than a completely different one e.g. Latin could be relatively easily adopted by Gaulish Celtic speakers because they are related Indo-European languages. Ditto Semitic Arabic by Coptic Egyptians whose language while not technically Semitic was related to it, both, together with some other languages such as Berber, being part of what is called the Afro-Asiatic family of languages.
Applying these two tendencies (rules would be too strong a word for them, you can find exceptions, but I think they have some validity) the vast Afro-Asiatic language speaking Egyptian population was relatively unlikely to adopt the unrelated Indo-European language of the ruling Greek minority.
It was though more likely, although the process cannot have been that easy, as it seems to have taken nearly a thousand years to complete, for the Arabic of the next set of rulers to be adopted by the Egyptian speaking population.
For example, as far as I can say as a non-expert but having studied some Ancient Egyptian and tried to find out a little about Coptic, the language derived from Ancient Egyptian that was spoken by the mass of the Egyptian people at the time of the Arab conquest, Egyptian and Arabic both either often or normally have the sentence order Verb-Subject-Object (V-S-O). Ancient Greek normally used either S-V-O (like English) or S-O-V.
Egyptian & Arabic both include sounds made deep in the throat that do not exist in Greek, or any other European language to my knowledge, with the possible exception of the long-extinct and non-Indo-European language Etruscan.
Egyptian & Arabic both divided the nouns into 2 genders (masculine and feminine) while Greek has 3, (masculine, feminine and neuter).
Hence, it was easier for Egyptians to adopt a language like Arabic than to switch to speaking Greek.
This does necessarily exclude other factors that other people have mentioned also having some importance e.g. once Egyptians began converting to Islam, the importance and prestige of Arabic as the language of the Quran. However, against that, in the Christian period Greek must also have had importance and prestige as the language of the New Testament, but that never led to Greek becoming the language of the Egyptian people, as Arabic later did.
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To add to the existing answers, I think it is important to emphasize that Greek was only the official languages in most of the Hellenistic kingdoms (that were outside the Greek lands), but especially in Ptolemaic Egypt. In Ptolemaic Egypt, the ruling class consisted of Greeks, but the vast majority of native population that could not speak Greek was treated with scorn. The Ptolemaic Kings did not try to integrate Greek language amongst the local population.
The following letter (see the second letter of this) demonstrates this fact.
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Actually, the Greek language did survive in Egypt......even into the present-day.
Although the Greek founded city of Alexandria in Northern Egypt has seen its fair share of conquests.......Romans, Arabs, Turks, Europeans-(The French and the British), the continuity of the Greek presence has existed in this city for over 2300 years.
The single Greek speaking institution that has continued through the millennia, is the Christian Patriarchate of Alexandria, one of the earliest Churches in World History.
The Egyptian Coptic language, is a mixture of Ancient Egyptian and Greek. This is a centuries old language that has been and is still central to the Coptic Church when conducting their liturgies in Alexandria, Cairo, as well as many other parts of Egypt.
Saint Catherine's Monastery, is located in the Sinai directly across from THE Burning Bush-(it was and is still widely believed by the Monks). It was founded by the Byzantine Emperor Justinian nearly 1500 years ago as a Greek speaking, Eastern rite Christian Monastery. The Monastery is reported to have an exquisite Library of precious and rare ancient manuscripts........mostly written in Greek.
And, not too far from Saint Catherine's Monastery, is a Greek Orthodox Chapel located at the summit of the Sinai. The Clergymen claim that the Chapel is built directly on the site whereby Moses was said to have received The 10 Commandments. (Again, it was and continues to be widely believed by the Greek speaking Clergy).
Currently, there is a very small Greek community in Cairo, as well as a smaller Greek community in Alexandria. During the rule of Abdel Nasser in the 1950's & 1960's, the centuries old Greek community of Alexandria was mostly displaced to Cairo, while only a tiny percentage remained in Alexandria. Many other Alexandrian Greeks relocated to Greece, as well as to the English Diaspora countries, such as the United States and Australia.
Yet, despite this mass population displacement, Greek communities and the Greek language, continue to exist within Egypt to the present-day.
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Greek language did not survive in any territory conquered by Alexander, except in Greece itself. Apparently the Greeks in the conquered lands were tiny minorities concentrated in the cities that they built, and had little cultural contact with surrounding populations. The rest of population continued to speak their native languages everywhere. For example, Farsi (Iranian) survived from the time before the Greek conquest to the present day. (It is interesting to notice that modern Farsi writing is based on Arabic, while old Farsi was a written language with its own alphabet.) Muslim conquest was a very different thing: it affected profoundly entire conquered populations, including their languages.
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The most notable continual use of the Greek language in Egypt was by the Patriarchate of Alexandria and the Orthodox communities that surrounded it. Estimating how large this community was throughout the middle ages is particularly difficult as few records exist in Arabic that document the community.
You can find a list of patriarchs of Alexandria on wikipedia as examples of individuals who knew Greek in medieval Egypt.
In the 19th century, Greek speakers both Muslim and Christian had migrated from elsewhere to establish communities in Cairo such as the neighbourhoods of Zouonia, Haret el Roum and Hamzaoui. Even a prime minister of Egypt, Rahgib Pasha was of Greek ancestry
According to a 1907 census, 6,924 Greeks lived in Egypt. In 1940, it was estimated to be around 25,000. During the Egyptian revolution of 1952, most had already emigrated to places like Australia or North America. Today, according to wikipedia, 1000 Greek speakers are estimated to be residing in the country.