Most of these that escaped made their way into the North, and Thrain I, Nain's son, came to Erebor, the Lonely Mountain, near the eastern eaves of Mirkwood, and there he began new works, and became King under the Mountain. In Erebor he found the great jewel, the Arkenstone, Heart of the Mountain. But Thorin I his son removed and went into the far North to the Grey Mountains, where most of Durin's folk were now gathering; for those mountains were rich and little explored. But there were dragons in the wastes beyond; and after many years they became strong again and multiplied, and they made war on the Dwarves, and plundered their works. At last Dain I, together with Fror his second son, was slain at the door of his hall by a great cold-drake. Not long after most of Durin's Folk abandoned the Grey Mountains. Gror, Dain's son, went away with many followers to the Iron Hills; but Thror, Dain's heir, with Borin his father's brother and the remainder of the people returned to Erebor. To the Great Hall of Thrain, Thror brought back the Arkenstone, and he and his folk prospered and became rich, and they had the friendship of all Men that dwelt near. For they made not only things of wonder and beauty but weapons and armour of great worth; and there was great traffic of ore between them and their kin in the Iron Hills. Thus the Northmen who lived between Celduin (River Running) and Carnen (Redwater) became strong and drove back all enemies from the East; and the Dwarves lived in plenty, and there was feasting and song in the Halls of Erebor. So the rumour of the wealth of Erebor spread abroad and reached the ears of the dragons, and at last Smaug the Golden, greatest of the dragons of his day, arose and without warning came against King Thror and descended on the Mountain in flames. It was not long before all that realm was destroyed, and the town of Dale near by was ruined and deserted; but Smaug entered into the Great Hall and lay there upon a bed of gold. From the sack and the burning many of Thror's kin escaped; and last of all from the halls by a secret door came Thror himself and his son Thrain II. They went away south with their family into long and homeless wandering. With them went also a small company of their kinsmen and faithful followers.

Years afterwards Thror, now old, poor, and desperate, gave to his son Thrain the one great treasure he still possessed, the last of the Seven Rings, and then he went away with one old companion only, called Nar. Of the Ring he said to Thrain at their parting: 'This may prove the foundation of new fortune for you yet, though that seems unlikely. But it needs gold to breed gold.' 'Surely you do not think of returning to Erebor?' said Thrain. 'Not at my age,' said Thror. 'Our vengeance on Smaug I bequeath to you and your sons. But I am tired of poverty and the scorn of Men. I go to see what I can find.' He did not say where. He was a little crazed perhaps with age and misfortune and long brooding on the splendour of Moria in his forefathers' days; or the Ring, it may be, was turning to evil now that its master was awake, driving him to folly and destruction. From Dunland, where he was then dwelling, he went north with Nar, and they crossed the Redhorn Pass and came down into Azanulbizar. When Thror came to Moria the Gate was open. Nar begged him to beware, but he took no heed of him, and walked proudly in as an heir that returns. But he did not come back. Nar stayed near by for many days in hiding. One day he heard a loud shout and the blare of a horn, and a body was flung out on the steps. Fearing that it was Thror, he began to creep near, but there came a voice from within the gate: 'Come on, beardling! We can see you. But there is no need to be afraid today. We need you as a messenger.' Then Nar came up, and found that it was indeed the body of Thror, but the head was severed and lay face downwards. As he knelt there, he heard orc-laughter in the shadows, and the voice said: 'If beggars will not wait at the door, but sneak in to try thieving, that is what we do to them. If any of your people poke their foul beards in here again, they will fare the same. Go and tell them so! But if his family wish to know who is now king here, the name is written on his face. I wrote it! I killed him! I am the master! ' Then Nar turned the head and saw branded on the brow in Dwarf-runes so that he could read it the name AZOG. That name was branded in his heart and in the hearts of all the Dwarves afterwards. Nar stooped to take the head, but the voice of Azog said: 'Drop it! Be off! Here's your fee, beggar-beard.' A small bag struck him. It held a few coins of little worth. Weeping, Nar fled down the Silverlode; but he looked back once and saw that Orcs had come from the gate and were hacking up the body and flinging the pieces to the black crows.

Such was the tale that Nar brought back to Thrain; and when he had wept and torn his beard he fell silent. Seven days he sat and said no word. Then he stood up and said: 'This cannot be borne!' That was the beginning of the War of the Dwarves and the Orcs, which was long and deadly, and fought for the most part in deep places beneath the earth. Thrain at once sent messengers bearing the tale, north, east, and west; but it was three years before the Dwarves had mustered their strength. Durin's Folk gathered all their host, and they were joined by great forces sent from the Houses of other Fathers; for this dishonour to the heir of the Eldest of their race filled them with wrath. When all was ready they assailed and sacked one by one all the strongholds of the Orcs that they could from Gundabad to the Gladden. Both sides were pitiless, and there was death and cruel deeds by dark and by light. But the Dwarves had the victory through their strength, and their matchless weapons, and the fire of their anger, as they hunted for Azog in every den under mountain. At last all the Orcs that fled before them were gathered in Moria, and the Dwarf-host in pursuit came to Azanulbizar. That was a great vale that lay between the arms of the mountains about the lake of Kheled-zaram and had been of old part of the kingdom of Khazad-dum. When the Dwarves saw the gate of their ancient mansions upon the hill-side they sent up a great shout like thunder in the valley. But a great host of foes was arrayed on the slopes above them, and out of the gates poured a multitude of Orcs that had been held back by Azog for the last need. At first fortune was against the Dwarves; for it was a dark day of winter without sun, and the Orcs did not waver, and they outnumbered their enemies, and had the higher ground. So began the Battle of Azanulbizar (or Nanduhirion in the Elvish tongue), at the memory of which the Orcs still shudder and the Dwarves weep. The first assault of the vanguard led by Thrain was thrown back with loss, and Thrain was driven into a wood of great trees that then still grew not far from Kheled-zaram. There Frerin his son fell, and Fundin his kinsman, and many others, and both Thrain and Thorin were wounded. Elsewhere the battle swayed to and fro with great slaughter, until at last the people of the Iron Hills turned the day. Coming late and fresh to the field the mailed warriors of Nain, Gror's son, drove through the Orcs to the very threshold of Moria, crying 'Azog! Azog! ' as they hewed down with their mattocks all who stood in their way. Then Nain stood before the Gate and cried with a great voice: 'Azog! If you are in come out! Or is the play in the valley too rough?' Thereupon Azog came forth, and he was a great Orc with a huge iron-clad head, and yet agile and strong. With him came many like him, the fighters of his guard, and as they engaged Nain's company he turned to Nain, and said: 'What? Yet another beggar at my doors? Must I brand you too?' With that he rushed at Nain and they fought. But Nain was half blind with rage, and also very weary with battle, whereas Azog was fresh and fell and full of guile. Soon Nain made a great stroke with all his strength that remained, but Azog darted aside and kicked Nain's leg, so that the mattock splintered on the stone where he had stood, but Nain stumbled forward. Then Azog with a swift swing hewed his neck. His mail-collar withstood the edge, but so heavy was the blow that Nain's neck was broken and he fell. Then Azog laughed, and he lifted up his head to let forth a great yell of triumph; but the cry died in his throat. For he saw that all his host in the valley was in a rout, and the Dwarves went this way and that slaying as they would, and those that could escape from them were flying south, shrieking as they ran. And hard by all the soldiers of his guard lay dead. He turned and fled back towards the Gate. Up the steps after him leaped a Dwarf with a red axe. It was Dain Ironfoot, Nain's son. Right before the doors he caught Azog, and there he slew him, and hewed off his head. That was held a great feat, for Dain was then only a stripling in the reckoning of the Dwarves. But long life and many battles lay before him, until old but unbowed he fell at last in the War of the Ring. Yet hardy and full of wrath as he was, it is said that when he came down from the Gate he looked grey in the face, as one who has felt great fear. When at last the battle was won the Dwarves that were left gathered in Azanulbizar. They took the head of Azog and thrust into its mouth the purse of small money, and then they set it on a stake. But no feast nor song was there that night; for their dead were beyond the count of grief. Barely half of their number, it is said, could still stand or had hope of healing. None the less in the morning Thrain stood before them. He bad one eye blinded beyond cure, and he was halt with a leg-wound; but he said: 'Good! We have the victory. Khazad-dum is ours! ' But they answered: 'Durin's Heir you may be, but even with one eye you should see clearer. We fought this war for vengeance, and vengeance we have taken. But it is not sweet. If this is victory, then our hands are too small to hold it.' And those who were not of Durin's Folk said also: 'Khazad-dum was not our Fathers' house. What is it to us, unless a hope of treasure? But now, if we must go without the rewards and the weregilds that are owed to us, the sooner we return to our own lands the better pleased we shall be.' Then Thrain turned to Dain, and said: 'But surely my own kin will not desert me?' 'No,' said Dain. 'You are the father of our Folk, and we have bled for you, and will again. But we will not enter Khazad-dum. You will not enter Khazad-dum. Only I have looked through the shadow of the Gate. Beyond the shadow it waits for you still: Durin's Bane. The world must change and some other power than ours must come before Durin's Folk walk again in Moria.'