My sister remembers this from our school library when she was little. She would have seen this between ~1976-1986. It was illustrated, a book intended for 10-and-under children.
She remembers there was a character who was very small, a dwarf of gnome-like creature who wore a gold ring intended for a human, as a a belt. I’d love to find it for her and her kids!
The Farthest-Away Mountain by Lynn Reid Banks. I believe the dwarf’s belt turning out to be a human’s ring was a bit of a twist towards the end of the book.
Confirmed – this is definitely the Farthest-Away Mountain. If the original poster ever sees this so many years later….