The Chaos Wars, also known as the Time of Star Death and The Days Of The Mad God's Rage, were a series of conflicts between the rising new order of the gods of Midkemia and the Valheru, or Dragon Lords, around 2000 years before the Riftwar.
According to the memories Tomas inherited from Ashen-Shugar, Rythar and Mythar, the two Blind Gods of the Beginning either fled, died or were driven away. The "threads of power" that Rythar wove together, and that Mythar tore apart, fell and eventually rose to become the various gods. Nakor later interpreted this as a "fundamental reordering of the universe", away from the rather basic forces of chaos and order to a more ordered, structured form, represented by the gods.
The Valheru gathered in conclave, and determined the gods "contest with us", but that their power was too great for the Valheru to overcome save though united effort. Draken-Korin, son of Ashen-Shugar, convinced the Valheru to impart their essence into the Lifestone, an artifact of mysterious nature, although often presumed to be a powerful weapon. Ashen-Shugar was the only one of his kind not to agree, and simply returned to his home to await what would come. The rest of the Valheru then rose up to challenge the gods, who were unprepared as they still contended against each other for control of various domains. The Valheru then united into a single entity which would become known only as "The Enemy". During the course of the battles most of the gods were slain (although being gods they would eventually return). Some of the gods lost included Ishap, The One Above Them All, and Arch-Indar, The Selfless One.
According to Bannath/Kalkin, the gods were severely being defeated and so he linked Tomas to Ashen Shugar, essentially infecting the most powerful of the Valheru with human empathy, causing him to withdraw from the conflict. When asked by Pug as to why a Lesser God resorted to this, Kalkin explained that while others of the gods could be considered as more powerful or such a thing being more in their domain (Pug cited Astalon the Builder or even Lims-Kragma, Goddess of Death), the others were all unable to do so as they were restricted by their nature and "the rules". Kalkin, on the other hand as the God of Thieves, was perfectly suited to break the rules.
Eventually, the gods were victorious and cast the Valheru into another dimension, but at great cost. The Valheru were defeated, but rampaged through the other dimension destroying everything they came across, including the original home world of the people that became the Tsurani. Of 107 hundred gods, only sixteen survived, with another four considered "lost". These included Sarig, Greater God of Magic, Eotis, God of the Sea, Wodar-Hospur, God of Knowledge, and Drusala, Goddess of Healing. Without the Goddess of Good to offset the God of Evil, and without the Balancer to balance all actions, the four Builder Gods exiled the God of Evil to a distant universe. Nalar is to remain imprisoned until the continual worship from the mortal races could revive the 'dead' Ishap and Arch-Indar.
Ashen-Shugar gave the elves their freedom and told them about the new races of Midkemia. Some of them said that they would live in peace with these new beings, while the others were to say that they would war on them, as they were the ones to "inherit the mantles of power" and traveled to the north to dream dreams of power.
The ones rendered mad by the destruction in the Chaos Wars snuck off to plot against their brothers. He then traveled back to his home in the Eagle's Reaches to spend the rest of his life, where eventually Tomas would come upon his armor and inherit his legacy and powers.