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No one knows for sure. There are many theories. The most believed is they evolved in the Rito. If you look on Medli's shirt it has the symbol of the Zora Sapphire.

Actually, it has been confirmed by Eiji Aounama that the Zora evolved into Rito, much like the Kokiri evolved into Koroks. Still, some believe that they were once at GreatFish isle. At least until it was attacked and the Zora's went elsewhere. Then again it has been confirmed by Eiji Aounama that the Zora's did in-fact evolve into the Rito.

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