The Magic Council was assembled by Illyria following the End of Magic in order to protect and preserve what little mystical energy remained as well as combat the growing threat of the Siphon. Most members of the council perished in the fight against Maloker in the Deeper Well, with only Eldre Koh and D'Hoffryn as the known survivors.
Following the restoration of magic, the Council reformed with D'Hoffryn and a new group of demons to keep the world in check as the new rules were established. In order to ensure that the new rules were adhered to without making any of the affiliated demons too powerful, Buffy and the other Scoobies created a series of rules where each member of the Council would have a particular ability that they could use against those who would threaten the balance, but that ability would be tied to their position rather than the individual demon themselves. They were also in alliance with Theo Daniels and Lake Stevens to find a way to close the dimensional portals when the Earth was invaded by thousands of demons and dangerous creatures.
However, it was later revealed that D'Hoffryn had worked in a crucial clause to the rules of the Council, in the form of a loophole that another member would inherit the powers of a Council member if they were killed until a 'replacement' could be appointed, thus allowing him to eliminate the rest of the Council and take their powers for himself.