The noun jewel, which dates back to the late 13^th century, is from Old-French and Anglo-Norman forms such as juel, jeuiel, jouel, joyel, etc.

The plural forms were juaux, jeuiauls, jouaux, joyaulx, etc. The Modern-French word is joyau (plural joyaux), because, under the influence of the plural ending -aux, the original singular ending -el has been replaced by -au.

The word juel, jeuiel, etc., was a diminutive of jeu, which means a game, a play, from Latin jocus, a jest, a joke, a game (cf. English jocular). Etymologically therefore, a jewel is a little game, a little plaything.

(Similarly, the English noun jeopardy was derived from the French expression jeu parti, literally a divided game or play.)

However, the more usual word for jewel in French is bijou, which dates from the 14^th century and is from the Breton word bizou, meaning a finger-ring, a jewel, from biz, finger. Similarly, in Cornish, another Celtic language, bisow (from bys, finger) denotes a ring.

Therefore, French has two pairs of words besides joyau and bijou:
– joaillier and bijoutier, which mean jeweller,
– joaillerie and bijouterie, which mean jeweller’s shop.

The first known user of bijou in English was Lady Chaworth in a letter of 4^th May 1668 to her brother, Lord Roos:

(from: Historical Manuscripts Commission. Twelfth Report, Appendix, Part V. The manuscripts of His Grace the Duke of Rutland, K.G. preserved at Belvoir Castle. Vol. II – London, 1889)
The King of France hath lately made a closet which they call a cabinet of cristall and philigrin and four large cristall cesterns att each corner in which are perfumed gloves, fans, and all sorts of delicate bijoux for each lady to take att her pleasure and as they are emptied they are replenished.

The following passage from a letter that the English author and politician Horace Walpole (1717-97) wrote on 5^th June 1747 to his friend the diplomat Horace Mann (1706-86) shows the transition to the current sense of English bijou, which, as an adjective qualifying nouns such as house, means small and elegant (this adjectival use does not exist in French):

(from: Horace Walpole’s correspondence with Sir Horace Mann – New Haven, Yale University Press, 1954)
I […] may retire to a little new farm that I have taken just out of Twickenham. The house is so small, that I can send it you in a letter to look at: the prospect is as delightful as possible, commanding the river, the town and Richmond Park; and being situated on a hill descends to the Thames through two or three little meadows, where I have some Turkish sheep and two cows, all studied in their colours for becoming the view. This little rural bijou was Mrs Chenevix’s, the toy woman à la mode, who in every dry season is to furnish me with the best rain-water from Paris, and now and then with some Dresden china cows, who are to figure like wooden classics in a library: so I shall grow as much a shepherd as any swain in the Astræa*.

* L’Astrée: a pastoral romance by the French author Honoré d’Urfé (1567-1625)

This paragraph from The Champion and Weekly Herald (London) of 23^rd February 1840 shows an early adjectival use of bijou drawing a parallel between the size of the playhouse and the nature of the theatrical productions:

Olympic.—With no less good taste than sound policy, Mr. Butler, the new lessee, though qualified himself to take a high range in tragedy, has hitherto adhered to that class of entertainment which, under the Vestris management, made this elegant little theatre so attractive. It is only in very large theatres that the ponderous plays of the legitimate drama are ever properly appreciated—unless produced with all the necessary means and appliances, which the minor houses cannot be expected to possess, the performance cannot be other than insipid. What we look for at a bijou theatre, such as the Olympic, St. James’s, or New Strand, are short, piquant pieces—comedies in little. These Mr. Butler is determined to continue, and has made up his company solely with reference to the efficient representation of such entertainments.