That's Arena the first Magic: The Gathering novel by William R. Forstchen.
As the fighter-mages of the four great Houses prepare for their annual battle, a powerful stranger arrives and he is interested in the fifth House, destroyed a generation ago--but why is the Grand Master afraid of him?
A Goodreads review has a bit more of a synopsis:
This isn't the most original story, but it doesn't pretend to break new ground -- it just romps with fierce joy over the old stuff. So you have a mysterious one-eyed stranger show up in town just before the Festival, when fighters (although they mostly rely on magic) from four houses battle each other until one is declared the best, in view of bloodthirsty crowds. Garth One-eye gains enough notoriety in illegal street duels to join a house and therefore the Festival. And although he doesn't hesitate to lie, bribe, or kill, he does possess a peculiar sense of honor -- and, it's increasingly clear, a mission: to win the Festival, and prove himself worthy as an apprentice to the god who strides between worlds. He'll make plenty of enemies along the way (almost as though checking them off a list), and gains a few amusing allies.
The Magic Wiki page for the novel also mentions:
Finally, he appears in the Arena and fights under the colors of the Fifth House, of which he is revealed to be a rare survivor. He lost his eye when his family was killed by the Grand Master. We also find that Hammen is of the Fifth House as well and used to serve Garth's father, who was leader of the House. When Garth is about to be killed, Norreen leads the crowd as a mob into the Arena to aid him.