The couatl are believed to be born from the pure blood of Siberys, the Dragon Above, after he was killed by Khyber, the Dragon Below, before it touched the soil of Eberron.
Couatl are thought to hail from Sarlona, where they were content to let the dragons explore the new world until the rise of the Overlords. Couatls are also said to have ruled over Xen'drik during the Unknown. When Khyber's first children, the Overlords, overran Eberron and claimed it for their own, the couatl supposedly fled and hid for a million years.
Eventually, they were found by the dragons, and together they declared war on the demons. Together, two of their great prophets, Ourelonastrix and Hezcalipa, discovered the Draconic Prophecy and turned it against the forces of the Overlords. Over millions of years, the dragons and couatl were able to stand against the individual forces of the Overlords, but the immortal sage Hezcalipa knew it wouldn't be enough to permanently defeat fellow immortal beings.
As the dragons fought, the couatls finally sacrificed their immortal essence around 100,000 years ago to form the Silver Flame and bind the first Children of Khyber for all time.