Thanks for this scale reference. Are there known stars smaller than Proxima Centauri?
Yes. Many white dwarfs are smaller; all neutron stars are much smaller. Those are stellar remnants, though. As for main-sequence M-class stars (red dwarves), the smallest one found so far is Gliese 623B. It's only 1/10 the sun's mass, and is 1/60000 as bright.
There is a class of objects between the smallest stars and the largest planets, called brown dwarves. They glow faintly in red and more brightly in the infrared, but do not sustain nuclear reactions in their cores.