The adjective undersized describes something that is smaller than usual. Your Great Dane is undersized if he fits comfortably on your lap.
A normal pony might weigh 450 pounds, while an undersized pony could be only 200 pounds. When something is undersized, it is smaller than average, often significantly smaller. An undersized t-shirt will be skin tight, and an undersized car might draw curious stares as it drives past. It's also correct to say undersize, although undersized is more common.