A word from the Westron language, used by the people of the Shire and Bree to refer to those of Halfling kind (it was, therefore, the word that Hobbits would have used to refer to themselves). It seems to have derived from an older compound, kûd-dûkan, which was still in use in Rohan and meant 'hole-dweller'.

In his 'translation' of the histories of Middle-earth, Tolkien used Old English to represent the language of the Rohirrim, and thus their kûd-dûkan became the Old English equivalent holbytla, giving rise to the more current and popular form used farther to the north: Hobbit. (It should be noted that this etymology was invented after the fact: the word 'Hobbit' came to Tolkien's imagination first, and then he devised this elaborate origin to explain it.)