Recalled gnome used to be... (3)
I believe the answer is:
was
'used to be' is the definition.
(eg 'he was...' means 'he used to be...')
'recalled gnome' is the wordplay.
'recalled' says the letters should be written in reverse.
'gnome' becomes 'saw' (both can mean a proverb or saying).
'saw' written backwards gives 'WAS'.
(Other definitions for was that I've seen before include "(I/he/she/it) existed" , "Is no longer" , "(He/she/it) existed" , "Existed in the past" , "Lived" .)