1. Go to ≡ -> Customize…
2. Press Density and select Compact.

Try this code in userChrome.css

@namespace url("http://www.mozilla.org/keymaster/gatekeeper/there.is.only.xul"); /* only needed once */

:root {
  /* fix for full screen mode */
  --tab-toolbar-navbar-overlap: 0px !important;
  /* set minimum tab height  */
  --tab-min-height: 25px !important;
}

#TabsToolbar {height:var(--tab-min-height)!important; margin-top:-1px!important; margin-bottom:1px!important}

You may need this code as well:

/* Override vertical shifts when moving a tab */
#TabsToolbar[movingtab] {padding-bottom:0px!important}
#TabsToolbar[movingtab] > .tabbrowser-tabs {padding-bottom:0px!important; margin-bottom:0px!important}
#TabsToolbar[movingtab] + #nav-bar {margin-top:0px!important}

@TyDraniu: I would like to keep Density set to "Touch" to have a wider toolbar.

@cor-el: I've inserted both snippets, it has no effect.

Hi dr01, are you familiar with the Browser Toolbox? It has an Inspector tool you can use to poke around in the toolbar area and test changes interactively by finding and modifying the values Firefox is applying (in the Rules pane to the right of the structural diagram). Once you find an approach that works, you can formalize a rule for your userChrome.css file.

https://developer.mozilla.org/docs/Tools/Browser_Toolbox

Try this code for the height. Make sure that --tab-min-height has the same value in both places.

@namespace url("http://www.mozilla.org/keymaster/gatekeeper/there.is.only.xul"); /* only needed once */

/* TABS: height */
:root {
 --tab-toolbar-navbar-overlap: 0px !important; /* fix for full screen mode */
 --tab-min-height: 25px !important;
}
:root #tabbrowser-tabs {
 --tab-min-height: 25px !important;
}
#TabsToolbar {height: var(--tab-min-height) !important;}

Thanks cor-el, this code works.

@jscher2000: Where are the Developer Tools Settings? I can't seem to find them on my Firefox (v64.0).

dr01 said

@jscher2000: Where are the Developer Tools Settings? I can't seem to find them on my Firefox (v64.0).

If you have opened the Developer Tools panel (e.g., Ctrl+Shift+i), it is on the ••• menu:

Once the developer tools are open, you can open the Settings page via the F1 key.

You can enable the Browser Toolbox via the Developer tools Settings page. Once the developer tools are open, open the Toolbox Options via the F1 key and look under "Advanced Settings":

"Enable browser chrome and add-on debugging toolboxes"
"Enable remote debugging"

This will add the Browser Toolbox item to the Web Developer menu (no restart necessary).