Cut around edges of tile to make smaller (7)
I believe the answer is:
shorten
'make smaller' is the definition.
(shortening is a kind of making smaller)
'cut around edges of tile' is the wordplay.
'cut' becomes 'shorn' ('shorn' can be a synonym of 'cut'**).
'around' means one lot of letters goes inside another.
'edges of' suggests removing the centre.
'tile' with its centre taken out is 'te'.
'shorn' going around 'te' is 'SHORTEN'.
'to' acts as a link.
(Other definitions for shorten that I've seen before include "Abbreviate" , "Curtail" , "Clip" , "contract" , "Cut back" .)