Dwarves have lived in Katur just as long as elves have. While the elves ruled the southern lands, the dwarves ruled the northern ones. The dwarves were utterly unprepared for an orc invasion, and their poor military failed to stop the orcs from driving the elves from their home. When the human forces arrived to reclaim the kingdom, the dwarven military had become much more efficient, and helped a great deal. The dwarven king, tired of ruling over an entire kingdom, agreed to uniting the northern and southern lands under human rule. In modern times, they still have great numbers in the northern parts of Katur. They have a hatred of orcs and a friendly rivalry with elves.
You can find out more about dwarves here.