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The feud beween the elves and dwarves began in the first age of the world. In short, lust for the silmarils caused the dwarves of Nogrod and King Thingol of Doriath to fall out and started a war between the two. Both sides blame the other and neither side ever forgets it.
Hollin and Moria was an exception, where the dwarves and elves were allies for the sake of trade and craftsmanship, I think.
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