Being diminutive, he takes up little room (3)
I believe the answer is:
ned
'up little room' is the definition.
The definition suggests a singular noun which matches the answer.
'being diminutive he' is the wordplay.
'being diminutive' becomes 'n' (I can't explain this - if you can you should give a lot more credence to this answer).
'he' becomes 'Ed' (short for Edward).
'n'+'ed'='NED'
'takes' acts as a link.
Can you help me to learn more?
(Other definitions for ned that I've seen before include "A den for Edward" , "rough" .)