Several bits of Norse Mythology lifted by J. R. R. Tolkein and mixed together for his literary mythos.

Sindarin for "Necklace of the Dwarves", the Nauglamír was made by the Dwarves of Nogrod and Belegost in the First Age, for Finrod, lord of Nargothrond.

The Nauglamír makes its first appearance in The Silmarillion as a consequence of Morgoth releasing his prisoner  Húrin, son of Galdor, from Angband.  It is certain that Morgoth had delighted in relating to Húrin the tragic tale of his children's fate.

As Húrin makes his way south into Beleriand, he comes upon the graves of his children Túrin and Nienor.  By a strange coincidence, Húrin's wife Morwen is keeping vigil on the grave, waiting for him.  When he arrives, they exchange a few words, and Morwen expired. Húrin is filled with bitterness at the Elven king Thingol, who was supposed to have given refuge to his wife and children.

He had; do you think Morgoth told Húrin everything?

Húrin visits the ruined halls of Nargothrond and slays the Petty-Dwarf Mîm, onetime betrayer of Túrin.   Although he considers the treasure rightfully his son's because Túrin had slain the dragon Glaurung, destroyer of Nargothrond, from all the treasure of Nargothrond, some brought from Valinor, Húrin takes on item only: The Nauglamír.

Húrin then makes his way into Doriath and throws the Nauglamír at King Thingol's feet. With bitter words he mocks the poor job of protection he believes Thingol has done.

Morgoth could not have asked for more.

Thingol's mind was on his most prized possession, the Silmaril which Beren had pried from Morgoth's crown to win the right to wed Thingol's daughter Lúthien.  He hires the Dwarves of Nogrod to re-work the necklace to include the Silmaril.   Although they do this, they covet the Silmaril and eventually slay Thingol. Beren (living in Ossiriand) hears of this, and intercepts the Dwarven army at Sarn Athrad and destroys it, personally slaying the Lord of Nogrod, and recovers the necklace.  Beren's son Dior moves into Doriath to rule over his grandfather's realm, wearing the Nauglamír as a token of his authority.

Eventually the presence of the Silmaril in Doriath rekindled the oath the sons of Fëanor had made.  They sack Doriath, killing Dior and leaving his sons Elúred and Elúrin in the forest to die.  However, Dior's daughter Elwing escapes with the Silmaril, to take refuge with Cirdan the Shipwright.

At some point around this time the Silmaril is removed from the Nauglamír and the necklace passes from history. The next we hear of the Silmaril it is bound on the brow of Eärendil as he searches the seas for aid from Valinor.