The Council of Nobles existed from several hundred years BTA until the raising of the Aegis. It consisted of representatives from five noble Houses (Kahar, Mikin, Lomasa, Zahir, Nillu) who ruled over the walled city-state now known as the Old City.
Those Houses (44 at the time of the raising of the Aegis) recognized by the Council as noble Houses were allowed to live within the city walls, and had some rights versus their fellow noble. Each House owned land outside of the city walls, where vassals tended their land in exchange for protection when the Wildlings came.
Fresh off his victories from the First Wildling War, Talus Kahar vastly expanded the Council's fortified territory with his controversial amnesty to the Shadow-Touched in exchange for the raising of the Aegis, and in turn, took definitive control over the group, causing serious unrest amongst the non-Council Houses. Once the Aegis was erected, he dissolved the lower Houses entirely save for one, House Seamel, adding it to the five recognized Houses in a political move that is very poorly understood in our time. From this dissolution of the nobility, the social classes of peasants, freelanders and merchants were created.