Malkav was a priest in Enoch before the flood, a priest who embraced the pre-Gnostic heresy that God had not created the universe or even desired it be created in the first place. Rather, Malkav believed that a wicked entity called the Demiurge created the universe against the wishes of God, and thus all of creation is itself wicked and evil as a result. Seeking to change this reality, he attempted to study the arts of the Mages to find a way to reshape reality as they do. Whether it was his meditations on this task, those on his heretical theology, or a curse bestowed upon him by Caine or even God himself is unknown, but it is blatantly obvious that every single Vampire who is borne of Malkav's blood is utterly and irredeemably insane to one degree or another. When the Camarilla was formed, the Malkavian elders collectively put together what few scraps of sanity they still could muster, and joined the group for protection. Realizing that the other clans could never trust them due to their insanity, they put much effort into clearing themselves of their dementia, with some notable success. Over 90 percent of the clan was eventually partially cured of their madness, at least enough to somewhat blend into human society (even if only as an inmate in a mental institution), and to persuade the other clans to let the Malkavians live. Those who could not be cured or who could not be forced to allow themselves to be cured eventually drifted into the ranks of the Sabbat, where harsh conditions drove them even further around the bend. Unfortunately, as Gehenna approached, whatever magical rituals had been used to accomplish this began to break down, and even the cured Malkavian vampires went steadily insane again. When Malkav himself awoke from torpor during Gehenna, his insanity and power were both at such extreme levels that his hallucinations became solid, and he achieved his ancient dream of being able to reshape reality with his mind. Of course, his mind was utterly unbalanced and fractured beyond repair, and instead of cleansing the world of wickedness and evil, all he managed to do was imprison himself in an extra-dimensional prison of his own solidified hallucianatory madness. Few Malkavian vampires survived Gehenna or the Crusader Team raids that drove most Camarilla vampires out of the Federation and into the Kingdom of Enoch. The survivors were able to replenish their numbers somewhat in Enoch, but they remain one of the least numerous of the Core Clans of the Camarilla.
Not only does the blood of Malkav turn all new Malkavian vampires insane, the tendency for their members to associate with, befriend, and embrace humans who are themselves already insane in some manner has actually increased this effect. Additionally, many Malkavians possess the supernatural ability to drive others insane as well. Malkavians do not get along well with most other clans, but the anarchic glee of some members is appreciated by the Brujah, and those who abandon the Camarilla to join the Sabbat get along famously with the factions of the Sabbat that embrace their own evilness and revel in acts of depraved madness.