Werewolves were powerful wolves encountered by Kain in Blood Omen: Legacy of Kain. They were stronger and more powerful than normal wolves and were only revealed as werewolves when they were killed - as they returned to human form as they died. This seemed to be in a similar manner to Kain's own Wolf Form, except they were clearly not Vampires, given their 'unchanged' Human state. As with traditional Werewolves they were more powerful or more active during a full moon, as was Kain - particularly in his wolf form. The biggest concentration of Werewolves Kain fought was around the Lost City. How they relate to Kain and Vorador's wolf forms is unknown and they have yet to reappear in the series.
Given the large amount of Werewolves in the Lost City, it is possible that this race was its creators; this would explain its unique architecture. On the other hand The Lost City was protected by a Moon gate and would only have opened during a Full Moon - this alone could explain their presence. Similarly they are present in large numbers in the trail leading to the Lightning Spell, which is protected by a Moon Gate and they could only have got here through access during a Full Moon.