The Cŵn Annwfn first appear in written form in the First Branch of the Mabinogi, the collection of medieval Welsh tales preserved in the White Book of Rhydderch and the Red Book of Hergest. Pwyll, Prince of Dyfed, was out hunting with his own hounds when he came upon a strange sight: a stag brought down by a pack of dogs unlike any he had ever seen. Their coats were a brilliant shining white, their ears were red, and as the whiteness of their bodies shone, so did the redness of their ears glisten. Pwyll, not knowing whose pack they were, drove them off the stag and set his own hounds upon the kill. A horseman arrived in a grey cloak, his face pale and terrible, and rebuked Pwyll for the insult. The horseman was Arawn, King of Annwn, the Otherworld that lies beneath the hills and beyond the western sea. Pwyll had trespassed upon the hunt of the King of Annwn and stolen his quarry, a crime that could only be redeemed by a year and a day in Arawn's place, fighting Arawn's mortal enemy Hafgan while the king himself took Pwyll's shape and ruled Dyfed. Pwyll agreed, and the friendship that followed between the prince of the living world and the king of the dead is one of the oldest and most celebrated bonds in Welsh literature. The Cŵn Annwfn were the instrument of their meeting, the white dogs with red ears that marked the boundary between two kingdoms.

The appearance of the Cŵn Annwfn is their signature and their warning. White animals in Celtic tradition are markers of the Otherworld, creatures that belong to the gods and the fair folk, and the red ears are the colour of blood and death. Together they form a creature that is neither wholly of this world nor wholly of the next, a hound that can cross the threshold between the living and the dead as easily as a mortal dog crosses a stream. In Welsh folklore, recorded by the folklorist Elias Owen in the nineteenth century, the hounds are described in various forms: sometimes small and liver-coloured, spotted with red and white, or entirely flame-coloured; sometimes black and ugly with huge red spots; and in the most terrifying accounts, blood-red in body and dripping with gore, with eyes like balls of liquid fire. The common thread is always the red, the colour of the life that the hounds have come to collect.

The hunting grounds of the Cŵn Annwfn are scattered across the Welsh landscape. The mountain of Cadair Idris in Snowdonia is their most famous territory, where it is believed that the howling of these huge dogs foretells death to anyone who hears them. They are also said to hunt at crossroads, graveyards, and stiles, the liminal places where human souls are most vulnerable, and their presence is most often reported on the eves of religious festivals: St. John, St. Martin, St. Michael, All Saints, Christmas, New Year, St. Agnes, St. David, and Good Friday. Some traditions say that Arawn hunts only from Christmas to Twelfth Night, while others claim the hounds are most active in the autumn and winter, when the veil between the worlds grows thin. In Radnorshire, they were said to be heard most often in spring, and across Wales they were linked to wild and stormy nights, when the wind carried their baying across the hills and valleys.

The sound of the Cŵn Annwfn is their most uncanny quality. Unlike earthly hounds, whose barking grows louder as they approach, the Cŵn Annwfn do the opposite. Their growling is loudest when they are far away, a great bellowing that seems to come from the edge of the world, and as they draw nearer, it grows softer and softer, until at last it is no more than a whisper at the door. The Reverend Edmund Jones, an eighteenth-century minister who wrote extensively on Welsh apparitions, recorded that the hounds sounded like the voice of a great hound or a bloodhound, a deep hollow voice that seemed to come from beneath the earth itself. This reversal of natural law is part of their otherworldly nature: they are not creatures of the physical world, and their sound obeys the laws of Annwn, not the laws of Britain.

In later folklore, the Cŵn Annwfn became part of the Wild Hunt, the pan-European tradition of a spectral chase across the stormy sky led by a god of the dead and his magical hounds. In Wales, the hunt was led first by Arawn and later by Gwyn ap Nudd, the king of the Tylwyth Teg, the fair folk, who became the ruler of Annwn in medieval tradition. Gwyn's favourite hound was Dormarch, a red-nosed dog of supernatural size, and his chief huntsman was Iolo ap Huw, who every Halloween could be found cheering the Cŵn Annwfn over Cadair Idris. The hounds also came to be regarded as escorts of souls, guiding the newly dead from the mortal world to the Otherworld, and in some traditions they were accompanied by Mallt-y-Nos, Matilda of the Night, a Norman woman cursed to ride with the pack forever after declaring that she would rather hunt than go to heaven. The Christians who encountered the hounds in the Middle Ages called them the Hounds of Hell and associated them with Satan, but the Annwn of Welsh tradition was a paradise of eternal youth and plenty, not a place of punishment, and the Cŵn Annwfn were guardians and guides, not devils. Their role was to hunt wrongdoers into the ground until they could run no longer, to avenge the victims of cruelty by turning the hunters into the hunted, and to ensure that no soul was left wandering alone between the worlds.