Era beginning/end
Many Dwarves from the Prime Material Plane were unwillingly sent to the Plane of Faerie where they underwent a transformation into the first Gnomes.
The Primordials sought to cleanse the Prime Material Plane by taking the parts they deemed "too bright" or "too dark" and setting them aside. These mountains deemed too bright were sent away to what became the Plane of Faerie, stranding many Dwarves in the burgeoning plane. Normally resistant to the magic of the Prime, these unwilling and unwitting travelers had no defenses against the powerful magic of Faerie and slowly mutated into shorter, less rotund, less lawful, and more magically adept versions of themselves—the Gnomes. These gnomes quickly spread and propgate, filling many places in the new plane and leaving the mountains behind, though still preferring the safety of the ground above having to live under the open sky.