The answer lies, as it often does, in George R.R. Martin’s books. The history of the nine city-states of Essos known as the “Free Cities” are fleshed out in Martin’s main A Song of Ice and Fire saga and a handful of other texts. The encyclopedic The World of Ice and Fire and the alternate history book Fire & Blood (upon which most of House of the Dragon is based) contain the most useful information regarding Lys’s culture, geography, and politics.
Eight of the nine Free Cities (with Braavos as the exception) were once western outposts of the House Targaryen’s ancestral home, the Valyrian Freehold. After a cataclysm known as the Doom of Valyria all but wiped that empire off the map, nine of the Freehold’s cities continued on in western Essos like business as usual.
As King Viserys’s Small Council notes in House of the Dragon’s first episode, the Free Cities rarely, if ever, pose a military threat to the Seven Kingdoms in Westeros. Occasionally, a handful of cities will rally around a charismatic leader or cause. We are seeing this happen currently in House of the Dragon as The Triarchy, an alliance of Lys, Myr, and Tyrosh, gathers under the leadership of Craghas “Crabfeeder” Drahar. For the most part, however, all nine Free Cities are happy to operate as independent entities and frequent trading partners of Westeros.
Of the nine Free Cities, Lys is perhaps the most beautiful and populous (though its precise population is not known). The city resides upon several rocky islands off the western coast of Essos. Its people are known as the Lyseni. Like many of the other Free Cities, Lys is primarily concerned with trade and its natural splendor and relative safety make for excellent capitalistic conditions. Along with the ample trading that goes on in Lys, the city is particularly hospitable to its male guests thanks to the many “pillow houses” and “pleasure gardens” that dot the island.
What’s interestings about Lys from the books, and House of the Dragon’s subsequent deviation from it, is that the city is said to be the most “Valyrian” of all the Free Cities. The Lyseni people are said to resemble Valyrians, having the same blond hair and lilac eyes that House Targaryen is known for. Of course, in House of the Dragon, Mysaria has dark hair and does not have a similar appearance to any Targaryen we know.
It’s possible that House of the Dragon’s Mysaria is not “ethnically” Lyseni but rather Lyseni in the sense that she was a resident of a pillow house in Lys. It’s also possible that House of the Dragon has just decided to not worry about the appearance of Free City residents so long as they appear sufficiently different from the main characters.