Make merry, losing heart in dance (4)
I believe the answer is:
reel
'dance' is the definition.
(I know that reel is a type of square dance)
'make merry losing heart' is the wordplay.
'make merry' becomes 'revel' (synonyms).
'losing heart' means to remove the middle letters.
'revel' with its middle taken out is 'REEL'.
'in' is the link.
(Other definitions for reel that I've seen before include "Vigorous dance" , "blows making one do this?" , "A merry dance or an angler's winder" , "Drum - dance - music" , "Dance - sway - cotton holder" .)