The Moon Clan is a tribe of magically and telepathically gifted humans residing on the Lunar Isle and led by the Oneiromancer, a powerful female mage. The clan is believed to take its name from the crescent-shaped isle it lives on. The Moon Clan is in a bitter and ancient war with the Fremenniks in Rellekka. This feud goes back many decades and is fed in part by the clan's refusal to share the secrets of their magic with the Fremennik, the clan's use of magic in everyday life, and the Fremennik's great mistrust of magic users. During the Lunar Diplomacy and Dream Mentor quests, the player discovers more about the Moon Clan.
The Moon Clan split from the rest of the nomadic Fremennik tribes after their discovery of the Stone of Jas. Interaction with the Stone uplifted the clan, giving them and their descendants a higher level of control over magic and procedural consciousness seen nowhere in any other humans and few mortals, and also the ability to float. Jealously guarding their new abilities, conflict arose between the Moon Clan and other tribes. The clan fled to Lunar isle, where it lived with at uneasy truce with the neighbouring Fremennik until recently, when the player brings peace to the warring tribes.
According to Baba Yaga, the Fremennik discovered how to make runes, but members of the tribe quarreled over the use of the powerful objects. The Moon Clan's ancient leader (whom Baba Yaga refers to as he), discovered the rune essence mine on the Lunar Isle, and with his followers built the runecrafting altars across Gielinor. (The Moonclan manual suggests the Moon Clan's ancient leader and V------- are the same person.)
Tensions between the Moon Clan and the Fremennik grew, however, and the Moon Clan retreated to the Lunar Isle. The Fremennik then destroyed the entrances to the altars the Moon Clan had made in an attempt to wipe away magic.
In isolation on the Lunar Isle, the Moon Clan has pushed its magical abilities to the point where its members no longer need runes to use magic.