There's a small ravine somewhere in the forest by you with a Gnome that is bringing water back to his village. He tells you that only Gnome-sized people can get in and he hands you a Mini scroll. He'll do this whenever you don't have a scroll in your inventory, so you can teach the spell to everybody (even though he claims he only has one extra
).
Anywho, you need to use Mini and go walking around the southern forests until you enter the village, just like you entered the water hole area. This is pretty dangerous though, as you will still enter battles while in Mini form, and that puts any physical fighters at a serious fighting disadvantage and EVERYONE with poor physical defense.
Mini is a Level 2 spell, so you're going to need to have someone who's able to use it. If you haven't been training up a White Mage, I suggest you start doing so now, because you'll be doing this transformation technique with Mini a few more times as well as using Toad a little later on (another Level 2 spell).
Hope that helps you!