According to Official Guinness Records,
The smallest commercially available stitched teddy bear measures 9 mm (0.35 in) and was made by Cheryl Moss (South Africa).
Cheryl has been making and selling 'Microbears' for 6 years in specialist teddy bear stores. Microbears range from 9 mm to 13 mm in size.
For a complete list of 2003 records, please visit 2003 Guinness Records in South Africa.