The Dagon'hai are an ancient Zamorakian organisation, situated in the Tunnel of Chaos. Their leader Surok Magis can be found in Varrock palace library; he plays a pivotal role in the What Lies Below quest.
The Dagon'hai have existed at least since the early Fifth Age. During this time they were situated in Varrock. In those days worship of Zamorak was not as much frowned upon, and the Dagon'hai had no trouble with the general population. However the priests of Saradomin looked darkly upon them, and soon a secret war was waged away from the eyes of the city citizens. Priests of Saradomin were found dead in darkened streets and Dagon'hai were put into cells and tormented.
The people of Varrock did nothing until the first Wizard Tower was burned down. They turned against the Dagon'hai, and with both the people of Varrock and the priests of Saradomin against them, the Zamorakians were all but decimated. Their numbers shattered, they hid in the darkest houses of the most dimly lit streets of the city. The survivors delved deep into the most evil of arcane magic, with the intent of exacting retribution on the priests of Saradomin and the people of Varrock. Varrock may have even fallen had they succeeded, but for a young guardsman who happened across the Elders of the Dagon'hai engaging in a sacrificial ritual. The guardsman sounded the alarm and the Dagon'hai, knowing they would be slaughtered, fled. The Elders stayed back to fight off pursuers and were slain. Those who fled went as far as a statue of Saradomin, where they disappeared under mysterious circumstances.
Currently the Dagon'hai live on, led by Surok Magic, but are in hiding. Three members can be found in the Tunnel of Chaos. According to one of them, Dakh'thoulan Aegis, there are other Dagon'hai hiding in similar tunnels elsewhere.