The main part of this article relates to the last versions of Middle-earth's history, and as such may controvert parts of The Silmarillion. See Middle-earth canon for a discussion. This subject's portrayal in earlier or alternative versions is discussed in the other versions of the legendarium section.
After Húrin brought the treasures of Nargothrond to Doriath, Thingol summoned Dwarves of Belegost to Menegroth and invited them to work the treasure into jewellry. The finest of these pieces was the Nauglamír.
The Nauglamír was the second-greatest treasure of Doriath, prized above all but Beren and Lúthien's Silmaril. After the smiths of Belegost finished their work on the Nauglamír, Thingol requested that the Dwarves of Nogrod set the Silmaril in it. The Nauglamír, now bearing the Silmaril was held to be the fairest object in Arda.
Enthralled by its beauty and greedy for the Silmaril, the dwarves demanded the necklace insisting that as dwarf work it belonged to them. Thingol was unwilling to surrender the treasure and replies with an impertinent answer. In their anger, the dwarves slew him. Two escaped to Nogrod and persuaded the city to march on Doriath. They escaped and told a much different story to their home cities and got them to march on and sack Doriath.
After the Fall of Doriath, the Dwarves of Nogrod marched homewards with the stolen Nauglamír and the rest of the treasures of that land but Beren, at the head of an army of Laiquendi and Ents slew the dwarves. The treasure was cast into the Ascar save the Nauglamír, which Beren gave to Lúthien.
After Beren and Lúthien's final deaths, the necklace was inherited by their son, Dior, in Doriath. This brought about the Second Kinslaying as the Sons of Fëanor, seeking the Silmaril in accordance with the Oath of Fëanor, attacked Doriath. Dior's daughter, Elwing, escaped the kinslaying with the Nauglamír, fleeing to the Mouths of Sirion.
In the Third Kinslaying, the Sons of Fëanor attacked the Mouths of Sirion, still trying to obtain the Silmaril within the Nauglamír but Elwing cast herself into the sea with it rather than surrender the gem to Maedhros and Maglor. The Nauglamír was lost, while Elwing and the Silmaril were saved by the ValaUlmo.
Other versions of the legendarium
In earlier versions of the myths of the First Age the Nauglamír, known as the Nauglafring, is more important: the necklace becomes caught behind a tree branch when Thingol is riding outside the Girdle of Melian and is attacked by the Dwarves. Thingol is unhorsed and slain. Following this, Melian's protection is lifted and Doriath is sacked.