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The Dwarf is an Effect-giving NPC found in the Candle World. His appearance is of a colorful gnome carrying a sword. He constantly runs to the east at the same speed that Madotsuki moves with the Bicycle effect, so is tricky to catch without either the Bicycle or Stoplight effects.

Interacting with him gives you the Midget effect.

While running, he passes a purple pyramid which leads to The Checkered Tile Path. He can be killed with the Knife effect and reacts normally to the Cat effect.

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Yume Nikki - How to get the Midget

Yume Nikki - How to get the Midget