The Sundering lasted from circa 1000 BC to 1200-1400 AD, when folks started to stop believing in the Fae, and the pressure of Banality began to build. Early on in the Sundering, the Dreaming came into existence as separate areas from the Mundane World, possibly as a buffer zone to keep the dreams of Mankind from changing Arcadia itself. Mid-way along in the Sundering, the Mists were established as the split grew between the mundane and the mythic, causing the records and evidence of dragons and unicorns and suchlike bygone beasts to be dismissed by the mortal mind.
Some argue that the Sundering arose simultaneously with the Iron Age as humans learned to craft better weapons that could cause terrible damage to both mortal and immortal enemies. Others say that as soon as the Sons of Adam and Daughters of Eve learned to dream they learned to disbelieve them. As tribes settled in place, cities anchored the mortals and the protection of wood and stone houses began to create concepts of unchangingness. Dreams and True Dreamers became the exception, not the rule. The mortal realm and the Dreaming began to drift further apart as human disbelief and explanations protected them from the creatures birthed of their imaginations.
Of course, the power to dream couldn't be taken away easily after it was gifted. Where the fae once shaped the dreams of humans they were now bound to them and formed by them. They began to mimic human ways and dreams. Fae chieftains became kings, warriors: knights, and their lands demesnes and fiefs and estates. The wars of mortals cast their dark reflections on the fae world as well. In response the fae created their own defense, the Mists, to cloud the minds of the Sons of Adam and Daughters of Eve and make sure they couldn't penetrate to Arcadia itself. Again, the two worlds were driven further apart.
The creating of the Inquisition in 1233 was the culmination of the Sundering as the Church in their doctrinal pursuits tried to eliminate all undesirable supernatural elements, including the fae, from the world. To save themselves from the pyres and gallows the fae retreated even further into the Dreaming, some even going so far as to seal themselves off entirely or limiting their interactions to Samhain, Beltaine, and Midsummer Night. Some left Europe and travelled the trods to find the fabled Tir-na-N'og with lands untouched by Banality.
But the Shattering was about to come.