The earliest Germanic dwarfs were not necessarily short, and dwarves was Tolkien's grammar slip
Picture a dwarf and you probably see a short, bearded miner. The oldest Germanic sources never clearly say dwarfs were small; they were supernatural craftsmen living in rocks and mountains, sometimes blamed for illness. And the plural dwarves, now everywhere, was popularised by J. R. R. Tolkien, who admitted it was bad grammar.
In Norse myth dwarfs forge the gods' greatest treasures. The brothers Brokkr and Sindri make Thor's hammer Mjölnir, and the sons of Ívaldi produce Odin's spear Gungnir and golden hair for the goddess Sif. Other stories are darker: Loki extorts treasure from the shape-changing Andvari, and the dwarf Alvíss, seeking Thor's daughter in marriage, is kept talking until dawn and turns to stone. Early texts only name male dwarfs, though they mention sisters and daughters, and female dwarfs appear in later sagas.
The word descends from Old English dweorg, with relatives such as Old Norse dvergr and Old High German twerg, all from a reconstructed Proto-Germanic form. Its deeper origin is fiercely debated. Suggested roots include words meaning damage or deception, a Sanskrit term for a demonic being, and a verb meaning to squeeze. Anatoly Liberman links it to English dizzy, reflecting a belief that dwarfs caused mental illness. Old English hints at such fears: a plant name for pennyroyal seems tied to a dwarf-related malady, and place names such as Dwerryhouse suggest dwarfs associated with underground spaces.
Dwarfs overlap with elves. The Prose Edda places both dwarfs and the black elves in the same realm, Svartálfheimr, and the list of dwarf names in the poem Völuspá includes Gandálfr, meaning something like wand-elf. Scholars disagree over how much of this pre-Christian lore survived into later medieval tales, with Rudolf Simek seeing strong continuity and others seeing little.
Dwarfs appear in the legendary sagas too; one named Dvalinn forges and curses the sword Tyrfing. The plural dwarves was recorded as early as 1818, but Tolkien spread it. In 1937 he called it a piece of private bad grammar, shocking in a philologist, noting that the regular descendant of the Old English plural would be dwarrows.
Source: Dwarf (folklore)