An excerpt from D&D Dwarf's Wikipedia article:
In particular, the dwarves in the Germanic story The Ring of the Nibelungen and the Brothers Grimm fairy tale "Rumpelstiltskin" have been called "ancestors" of Dungeons & Dragons dwarves. Along with giants, dwarves were one of the first types of non-humans to be introduced into the Chainmail game, the forebear of D&D, when miniature figures of varying sizes were used together in the same wargame. The dwarf first appears as a player character class in the original 1974 edition of Dungeons & Dragons, with a design that is strongly influenced by the dwarves of Poul Anderson's 1961 novel Three Hearts and Three Lions. This early version of the D&D dwarf is limited to playing a fighter, and can not progress beyond the sixth level. The dwarf is again a character class in the original Dungeons & Dragons Basic Set (1977). With the arrival of Advanced Dungeons & Dragons, the dwarf was modified into a player character race in the Player's Handbook (1978) and detailed as a monster in the original Monster Manual (1977)
I guess, mythology and tales characterized dwarves as small and cute beings (like elves described as fairies in tales and become human-like in D&D). I do not know how Anderson define these creatures in his novel. But I guess, in time, D&D thought they must look like strong warriors instead of cute little beings. Old D&D drawings are all show them as slimmer little fellows (D&D 1e) and by time, they got bigger and muscular with broad shoulders and well shaped chests.
And as fighters, being small is not fit for D&D concept much. Halfling and kender are rogue besed and really suitable for their role in the concept. But dwarves, mighty warriors with smaller size than a human? Bah, not so attractive...
Also, there is this question about origins of D&D dwarvesthis question about origins of D&D dwarves