The Dragon Cult began as a sect within the traditions of animal worship brought by Atmorans to Tamriel. Certain scholars believe these were "totem animals" for the modern Divines; in which case, worship of the dragon corresponded to worship of Akatosh. Dragons were revered more than any other, and they were comfortable in assuming positions as god-kings over men. Their servants, the dragon priests, kept the peace between dragons and men, and their power was so great that uttering any word for "dragon" was forbidden to all mankind except them. They made laws for the society of men, and were on par with kings. Grand temples were built to honor the dragons and appease them in life and death, many of which survive as draugr-infested ruins today. The dragon priests were promised eternal life for their service, which they receive by absorbing the life force of their servants over the millennia.
Some time during or soon after the migrations to Tamriel, the dragon cult began to assert more influence and become much more malevolent. From their capital Bromjunaar in modern-day Hjaalmarch, they ruled Skyrim with an iron fist, effectively enslaving the populace. While what led to this change was lost to historians, it was likely caused by Alduin, the First-Born of Akatosh and leader of the dragons, who had chosen to forsake his role as World Eater in favor of conquering Mundus for himself. Men eventually rebelled in the late Merethic Era, leading to the ancient Dragon War.
Men, with the help of several dragons, eventually secured victory with the defeat of Alduin. The dragon priests were overthrown and dragons were slaughtered in large numbers before fleeing to remote areas. Though they had lost their god-kings and were cast out of mainstream Nordic society, the dragon cult managed to adapt and survive for centuries. Whenever they could lay hands on the remains of a dragon, they would build a tomb for it known as a "dragon mound", a practice they maintained for centuries after the war. They believed that one day the dragons would rise again and reward the faithful.
When the priests of the Eight Divines arrived in Skyrim in the First Era, they found it very difficult to convert the Nords, in part because the Nords had abandoned the worship of the dragon along with the dragon cult. Thus, they only knew of the Great Dragon, Akatosh, as the elven god Auriel, who they despised as a demon. The missionaries were able to allay some concerns by claiming that Alduin and those who followed him had acted against the wishes of Akatosh, and it was his intervention that led some dragons to assist men against their brethren. The dragon cult was eventually driven extinct, surviving only in the form of draugr who continue to prowl ancient ruins. The last known holdouts were discovered and besieged in the monastery of Forelhost in the mountains of the Rift by the forces of High King Harald, eventually committing mass suicide in 1E 140.