Thráin I established the Kingdom under the Mountain fleeing from Moria. During his time the Arkenstone was discovered, the most prized possession of the Kingdom. His son, Thorin I, later became King under the Mountain but after seeing the wealth of the Dwarves of the Grey Mountains, he abandoned Erebor.
When the Cold-drakes invaded the Grey Mountains, they drove most of the Dwarves out. Thrór, a descendant of Thorin I, took some of his people and flew the Grey Mountains for Erebor. His brother Grór continued east with a great following of Durin's folk to the Iron Hills while he himself restored the kingdom of Erebor in TA 2590.
The Dwarves gained the friendship of the Northmen along the Celduin and had much trade of goods, beautiful trinkets, and weapons with the town of Dale. The Dwarves of Erebor also had much traffic of ores with their kinsmen in the Iron Hills and the region had peace and prosperity for many years.
The Dwarves were prosperous, and made great wealth for themselves until they were dispossessed of their immense wealth by the dragon Smaug, who flew south from the Ered Mithrin and sacked their kingdom in TA 2770. They were scattered for many years across Middle-earth, some resettling in the Blue Mountains under the leadership of Thorin II Oakenshield, grandson of Thrór and son of Thráin II.
The Dwarves reclaimed their inheritance many years later under the leadership of Thorin and his company during the Quest of Erebor, in the process of which Smaug was killed by Bard, a descendant of the Men of Dale. But it was the descendants of Dáin II Ironfoot that ruled there ever after due to the deaths of Thorin and his nephews Fili and Kili during the Battle of Five Armies.
After the restoration thanks to Thorin and Company, the Dwarves became again rich and prosperous under Dáin's rule, as the Dwarves exceeded their ancestors in masonry and mining. Dale was rebuilt as a kingdom and they had a close friendship with the Elves of Mirkwood.
Balin and other dwarves set out to reclaim Moria in TA 2989. Dáin did not give his blessing to the expedition and, though he did his best, could not dissuade them from their goal. It was later learned by the Fellowship that Balin and the dwarf colony was destroyed within five years of the colony's arrival by goblins and a Balrog. 
War of the Ring
In TA 3018, a messenger came from Mordor, inquiring about "Baggins" from "Shire", promising the last three Dwarf-rings to Dáin. The King asked for time to think about the matter and he sent Glóin and his son Gimli to Elrond for council, and to warn Bilbo about the messenger.
The War of the Ring reached the North; King Brand fighting the Easterlings retreated from the River Carnen and was given aid by Dwarves in the Battle of Dale. After three days of fighting Dwarves and Men were driven back, and Brand was slain, followed by Dáin. Despite the tragedies, the dwarves of Erebor and men of Dale were very successful in their defence of the North and the Lonely Mountain. This was solely due to the restoration of the dwarf kingdom of Erebor. Not only was Erebor an important strategic and defensive position, the unity of the both races enabled the dwarves of Erebor and men of Dale to drive the armies of Mordor from capturing the Lonely Mountain. When Sauron was defeated, the Orcs and Easterlings in the North retreated from their assaults on Erebor . When the new King Thorin III Stonehelm, son of Dáin, and Brand's Bard II saw this development, they came out of the mountain and routed out their enemies from their lands .
During the Third Age before the Desolation of Smaug and after the reclamation of Erebor, the dwarves of Erebor were renowned throughout Middle-earth for their skilled craftsmanship of metal. So well-known and knowledgeable in their craft that men of Dale were said to offer their sons to the dwarves for training and work.
The dwarves of Erebor not only skilled with shaping metal but were also skilled in making magical objects, usually toys. Whether this craft was used for other objects beside toys is unknown.
Language and writing
Coming from Moria, the Dwarves brought with them the Angerthas Moria, which was modified further. The runes of Angerthas Moria over time reverted to the Elvish values in Angerthas, maybe due to the dwarves early dealings with elves. The resulting variation was known as Angerthas Erebor.
Noted Dwarves from Erebor were:
- Thráin I
- Thorin I
- Thráin II
- Balin, Dwalin
- Dori, Nori, Ori
- Óin, Glóin
- Bifur, Bofur, Bombur
- Kíli and Fili
- Dáin II Ironfoot
- Thorin III Stonehelm
- Floi, Loni, Nali, Frár
- ↑ The Lord of the Rings, The Fellowship of the Ring, Book Two, Ch. 1: "Many Meetings"
- ↑ 2.0 2.1 The Lord of the Rings, The Fellowship of the Ring, Book Two, Ch. 2: "The Council of Elrond"
- ↑ The Lord of the Rings, The Fellowship of the Ring, Book Two, Ch. 5: "The Bridge of Khazad-dûm"
- ↑ Unfinished Tales, Part Three: The Third Age, Chapter III: "The Quest of Erebor"
- ↑ The Lord of the Rings, Appendix B, "The Great Years"
- ↑ The Lord of the Rings, Appendix F, "The Languages and Peoples of the Third Age"
- ↑ The Lord of the Rings, Appendix E, "Writing"; "The Cirth"