When can a development board be called Arduino? Obviously, the main reason is an Arduino compatible microcontroller and a bootloader that can be accessed from Arduino IDE. If you aren’t planning to use standard shields that need a special layout, you can build an Arduino board of whatever shape and size you want.
Following Femtoduino project uses an Atmega328p microcontroller in QFN32 package, and 0402 size passive components. This Arduino can fit on your fingertip literally (20.7×15.2mm). It uses 0.05″ connectors that can be braked out into regular 0.1”. Use this layout where circuit size really matters. BTW project is designed using Kicad.