This age was characterized by the waning of the Elves. In the beginning of the Third Age, many Elves left for Valinor because they were disturbed by the recent war. However, Elven kingdoms still survived in Lindon, Lothlórien, and Mirkwood. Rivendell also became a prominent haven for the Elves and other races. Throughout the Age, they chose not to mingle much in the matters of other lands, and only came to the aid of other races in time of war. The Elves chose to devote themselves to artistic pleasures, and tended to the lands which they occupied. The gradual decline of Elven populations occurred throughout the Age as the rise of Sauron came to dominate Middle-earth. By the end of the Third Age, only mere fragments of the once-grand Elven civilization survived in Middle-earth.
The Third Age was also characterized by the rise and decline of the Númenórean kingdoms of Arnor and Gondor. Meant to be one kingdom, the two countries split in the beginning of the Third Age, each experiencing different fates.
The so-called Watchful Peace began in 2063 T.A., when Gandalf went to Dol Guldur and the evil dwelling there (later known to be Sauron) fled east. It lasted until 2460 T.A., when Sauron returned with new strength. During the Watchful Peace Gondor strengthened its borders, keeping a watchful eye on the east, as Minas Morgul was still a threat on their flank and Mordor was still occupied with Orcs. But no major escalations occurred except for minor skirmishes with Umbar. In the north, Arnor was long gone, but the Hobbits of the Shire prospered, getting their first TookThain, and colonizing Buckland. The Dwarves of Durin's folk under Thorin I abandoned Erebor, and left for the Grey Mountains, where most of their kin now gathered. Meanwhile Sauron was not idle in the east: he created a strong alliance between the various tribes of Easterlings, so that when he returned he was more powerful and had many Men in his service.