In recent years, material-induced noise arising from defects has emerged as an impediment to quantum-limited measurement in systems ranging from microwave qubits to gravity wave interferometers. As experimental systems push to ever smaller dimensions, extrinsic system properties can affect its internal material dynamics. In this paper, we identify surprising new regimes of material physics (defect-phonon and defect-defect dynamics) that are produced by dimensional confinement. Our models show that a range of tell-tale signatures, encoded in the characteristics of defect-induced noise, dissipation, and nonlinearity, are profoundly altered by geometry. Building on this insight, we demonstrate that the magnitude and character of this material-induced noise is transformed in microscale systems, providing an opportunity to improve the fidelity of quantum measurements. Moreover, we show that many emerging nano-electromechanical, cavity optomechanical and superconducting resonator systems are poised to probe these new regimes of dynamics, in both high and low field limits, providing a new way to explore the fundamental tenets of glass physics.