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Dwarves have an average lifespan of around 195–250 years, which is almost double the average lifespan of a Halfling, who lives to be 96.8 years old. However, some dwarves such as Dwalin have lived to be over 340 years old, and others have lived past 250. Dwarves are on average between four and five feet tall. The Dwarves, or Khazâd in their own tongue, were beings of short stature, often friendly with Hobbits although long suspicious of Elves. They were typically blacksmiths and stoneworkers by profession, unrivalled in some of their arts even by the Elves.

While there were seven Houses of the Dwarves, the most prominent was that of the Longbeards. Sometime after the Elves had awakened at Cuiviénen the seven Fathers of the Dwarves were released from their stone chambers. The eldest of them, called Durin, wandered until he founded the city of Khazad-dûm in the natural caves beneath three peaks: Barazinbar, Zirakzigil, and Bundushathûr. The city, populated by the Longbeards or Durin's Folk, grew and prospered continuously through Durin's life (which was so long that he was called Durin the Deathless, also a reference to the belief by his people that he would be reincarnated seven times).

Far to the west of Khazad-dûm, the great Dwarf-cities of Belegost and Nogrod were founded in Ered Luin (the Blue Mountains) during the Years of the Trees, before the arrival of the Elves in Beleriand. The Dwarves of Belegost were the first to forge mail of linked rings, and they also traded weaponry with the Sindar and carved the Thousand Caves of Menegroth for Thingol, the Lord of Beleriand. In Nogrod, the Smith Telchar forged Narsil and Angrist, two of the most fateful weapons in the history of Arda, as well as the famed Dragon-helm of Dor-Lómin.

It is said that some Dwarves in the far East had fallen under the Shadow and were of evil mind when the ancestors of the Edain had encountered them.

The Dwarves of the Blue Mountains fought against the forces of Melkor during the First Age, and the Dwarves of Belegost were the only people able to withstand dragon-fire in the Battle of Unnumbered Tears, when Lord Azaghâl, who died in the battle, stabbed Glaurung, the first dragon. The Dwarves of Nogrod fought against Melkor as well. However, they slew Thingol out of greed and stole the Silmaril they had been charged to set into the necklace called Nauglamír. A number of retaliatory actions ensued, and the Nogrod army was destroyed by a force of Laiquendi and Ents. Both dwarf kingdoms would eventually be destroyed, along with nearly all of Beleriand, after the War of Wrath, with the dwarvish refugees mainly resettling in Khazad-dûm.

During those times of war in Beleriand, the Dwarves of Khazad-dûm prospered in relative peace colonizing the Iron Hills and the Grey Mountains and traded with the ancestors of the Northmen.

The seven clans of the Dwarves were:

Longbeards, Durin's Folk, originally from Gundabad.
Firebeards and Broadbeams, originally from the Blue Mountains.
Ironfists and Stiffbeards, originated in the East.
Blacklocks and Stonefoots, originated in the East.