There are a great many stories about the creation of this race. Most conflict and others are outright lies. There is one thread that seems to stand out from the rest. According to this particular legend, shortly after the Great Catastrophe, the Old World was suffused with magic, and born from this loosed energy were Daemons and other vile creations from the Realm of Chaos. The High Elves of Ulthuan would valiantly contain this energy, but the damage was done, and the world was forever changed. In the aftermath, Dwarfs experimented with sorcery despite their innate inability to harness the Winds of Magic. Instead of trying to cast spells in the ways of the Elf Wizards, they sought to bind them into images and symbols called runes.
Two positions immediately resulted. One group felt this road would lead to their doom, and the other craved the power it promised. Resentment bloomed and tempers rose, but despite their differences, they were one people, bound by their common heritage.
To alleviate the tensions, those Dwarfs who pushed the limits of the newly developing Rune magic travelled north, seeking out new lodes of gold, gemstones, and other precious metals, whilst the rest remained behind to proceed more carefully. These explorers included some of the most talented blacksmiths of all the Dwarf Realms, and they travelled north until, one day, they broke through the other side of the mountains and spied a land scarred and littered with chunks of obsidian, iron ore, and more. It was apparent to all that this place harboured some great and ancient evil, and so many turned away, continuing their journey north. However, some remained, seduced by the wealth they stood to gain from this blighted place. They named this new land Zorn Uzkul, the Great Skull Land, and claimed it for their own, building a great mountain hold called Karak Vlag, the Isolated Hold, to guard the place.
As the years passed, the Dwarfs sent scouts across the Greenskin-infested badlands, heading for the Mountains of Mourn to explore their fiery peaks. Along the way, they found broken weapons, old war machines, and massive chunks of obsidian, to say nothing of the boulders that shone with the streaks of gold they contained. When they arrived at the distant mountains, they found them rich with precious metals and gemstones. They built a fort in the open badlands they had dubbed the Plain of Zharr, and sent forth expeditions to mine the lodes from the stone. Despite the forlorn landscape, and poisonous fumes spewing from the sinister peaks, it seemed the Dwarfs were right to come here, as their hauls were incredibly rich. Soon, Karak Vlag was famed throughout the Dwarf Realms for its wealth and mighty feats of engineering.
However, disaster was at hand. The Great Eye of Chaos opened and spread its inky darkness south. At its vanguard rode the Tong, the vilest of all Chaos Marauders. The Dwarfs fled to their forts and holds, and sent pleas for aid to their kin in the southern holds, but no help came. Soon, the darkness swept over them, cutting them off entirely. Alone, and facing extinction, the Dwarf Runesmiths claimed had a possible answer. Using magical techniques they claimed to have mastered through studying the magical-resistant obsidian, they called out to the void for help. This time their pleas for aid were answered, but help would come at a heavy cost. The Dwarfs had no time to deliberate, for the Tong were tearing down their gates, so they hastily agreed to the price. Then, so Chaos Dwarfs claim, Hashut, the Father of Darkness, rescued his new children, and whisked them away from danger. When the other Dwarfs finally fought their way north through the Hordes of Chaos, they could find no trace of Karak Vlag. The entire stronghold had disappeared, as if it had never existed.
Diminished, the Dwarfs survived, but they were changed, altered in mind and spirit. As they had promised, the Runesmiths became their people's new Priesthood, their Sorcerer-Priests, and soon wrested control over their new society, dominating the other Dwarfs through their might with magic. Their first edict was to construct the great city of Zharr-Naggrund, the City of Fire and Desolation. At the centre, they planned a massive obsidian tower shaped like a ziggurat, and at its top they would erect a great altar to Hashut.
However, the Chaos Dwarfs, which is what they now were, realised they were too few to build all that Hashut demanded. First, they enslaved the native Greenskins to help them, but they proved unreliable and treacherous. So, the Chaos Dwarf Sorcerers, experimented with their Greenskin slaves and bred a new race of reliable Orc, which they called Black Orcs, but even they proved too wilful and independent. When the Black Orcs rebelled, it was only through the aid of the Hobgoblins that the Chaos Dwarfs were not wiped out entirely. So, the Chaos Dwarfs reluctantly allied with local tribes of Hobgoblins to further their cause. But, even with this expanded labour force, the Chaos Dwarfs were unable to complete their construction without the aid of slaves. They sent Hobgoblins to raid the Silver Road and bring supplies and victims back to Zharr Naggrund. But, even this was not enough. Thus, the Chaos Dwarfs began trading with the savage Humans of the north, a relationship that has lasted to this day. In exchange for slaves, the Chaos Dwarfs still toil in their forges to spawn new and horrible creations for their Human allies. Chaos Armour, magic weapons, and terrible war machines funnel from the Dark Lands into the hands of the eager Chaos Warriors. Meanwhile, the forges of the Chaos Dwarfs shroud the land in thick, noxious smoke lit by the flames of the cauldrons—the ringing of the hammers muted only by the shrieks of fear and pain of those condemned to such a malign fate. The whole of the structure tremors with the never-ceasing labours, and echoes with the screams of slaves dropped into cauldrons filled with molten iron, offered as sacrifices to appease the hungry God.