gnome (n.1)
"dwarf-like earth-dwelling spirit," 1712, from French gnome (16c.), from Medieval Latin gnomus, used 16c. in a treatise by Paracelsus, who gave the name pigmaei or gnomi to elemental earth beings, possibly from Greek *genomos "earth-dweller" (compare thalassonomos "inhabitant of the sea"). A less-likely suggestion is that Paracelsus based it on the homonym that means "intelligence" (see gnome (n.2)).

Popularized in England in children's literature from early 19c. as a name for red-capped German and Swiss folklore dwarfs. Garden figurines of them were first imported to England late 1860s from Germany; garden-gnome attested from 1933. Gnomes of Zurich for "international financiers" is from 1964.
gnome (n.2)
"short, pithy statement of general truth," 1570s, from Greek gnome "judgment, opinion; maxim, the opinion of wise men," from PIE root *gno- "to know."