He was born in a wealthy family of Sāvatthi and was given the title of Lakuntaka (Dwarf) owing to his very small stature. He was, nevertheless, beautiful in body, says the ApA.; but see below.
Having heard the Buddha preach, he entered the Order and became learned and eloquent, teaching others in a sweet voice. Once, on a festival day, a woman of the town, driving with a brahmin in a chariot, saw the Elder and laughed, showing her teeth. The Elder, taking the teeth as his object, developed jhāna and became an anāgāmī. Later, after being admonished by Sāriputta, he developed mindfulness regarding the body and became an arahant. The Udāna (vii.1, 2) makes reference to the admonitions of Sāriputta and to the Buddha's joy when these had the desired effect. The Commentary (UdA.360f.) gives details.
In the time of Padumuttara Buddha he was a very rich householder of Hamsavatī, and, having beard the Buddha describe one of his monks as the sweetest voiced among them all, he wished for a similar distinction for himself under a future Buddha. In the time of Phussa Buddha he was a cittapattakokila, named Nanda, (the Ap.loc.infra says he was the king’s general) who, seeing the Buddha in the royal park, placed in his bowl a ripe mango. In Kassapa Buddhas day he was the chief architect entrusted with the building of the thūpa over the Buddha's relics, and, when a dispute arose as to how big the thūpa should be, he decided in favour of a small one; hence his small stature in his last life. ThagA.i.469ff.; Ap.ii.489f; the account in AA.i.110f. is slightly different; the Kelisīla Jātaka (q.v.) gives a different reason for his shortness.
In the assembly of monks the Buddha ranked him as foremost among sweet voiced monks (A.i.25) (mañjussarānam). Several stories connected with Bhaddiya are recorded in the books. Because of his shortness and his youthful appearance he was sometimes mistaken for a novice (DhA.iii.387). Elsewhere (S.ii.279; cp. Ud.vii.5) it is said that, because he was ugly and hunch backed, he was despised by his companions, and the Buddha had to proclaim to them his greatness and hold him up as an example of a man who, though small, was of great power. Another account relates how novices used to pull his hair and tweak his ears and nose saying, "Uncle, you tire not of religion? You take delight in it?" But he showed no resentment and took no offence. DhA.ii.148; the introduction to the Kelisīla Jātaka, (J.ii.142) speaks of thirty monks from the country who, seeing Bhaddiya at Jetavana, pulled him about until they were told by the Buddha who he was.
It was in reference to Bhaddiya that the Buddha preached two famous riddle stanzas in the Dhammapada (294, 295; for the explanation of the riddle see DhA.iii.454), where he describes the arahant as one who has killed father and mother and two kings and destroyed a kingdom, but who yet goes scathe less - the words having a metaphorical meaning.
Several stanzas uttered by Bhaddiya in the Ambātakavana, as he sat there enjoying the bliss of arahantship, are included in the Theragāthā (Thag.vss.466 72).
In the Avadānasataka he is called Lakuñcika. See Avs.ii.152 60.