Das Bilderbuch, das auf dem Nachttisch liegt, erzählt von einem kleinen Hund.

They do two different jobs:

• The first das is the definite article for Bilderbuch: das Bilderbuch = the picture book.
• The second das is a relative pronoun: it means that/which and refers back to das Bilderbuch.

So:

• Das Bilderbuch = the noun phrase
• das auf dem Nachttisch liegt = extra information about that noun

In English, this is similar to The picture book that is lying on the bedside table...

Because das auf dem Nachttisch liegt is a relative clause, and in German, the conjugated verb usually goes to the end of subordinate clauses, including relative clauses.

So the normal main-clause order would be:

• Das Bilderbuch liegt auf dem Nachttisch.

But inside the relative clause, it becomes:

• das auf dem Nachttisch liegt

That final verb position is one of the most important German word-order patterns to learn.

Because the preposition auf here is describing a location, not movement.

German two-way prepositions such as auf can take:

• accusative for movement toward a place
• dative for location in a place

Here the book is already there, so it is a location:

• auf dem Nachttisch liegt = lying on the bedside table

That is why der Nachttisch changes to dem Nachttisch.

Compare:

• Das Buch liegt auf dem Nachttisch. = The book is on the bedside table.
• Ich lege das Buch auf den Nachttisch. = I put the book onto the bedside table.

This comes from the preposition von, which requires the dative case.

So:

• von einem Hund = about a dog

Then the adjective klein also has to take the correct dative ending because it comes after the indefinite article einem:

• masculine dative article: einem
• adjective ending after that: -en
• noun: Hund

So the full form is:

• von einem kleinen Hund

This is a very common pattern in German:

• mit einem guten Freund
• bei einem alten Haus
• von einem kleinen Hund

The verb erzählen is often used with von when you mean to tell about or to be about something.

So:

• Das Buch erzählt von einem kleinen Hund.

means the book tells a story about a little dog.

This does not work exactly like English word-for-word. In German, erzählen von + dative is a normal structure.

You may also see erzählen used with a direct object in other contexts, for example:

• Er erzählt eine Geschichte. = He tells a story.
• Er erzählt von seiner Reise. = He talks/tells about his trip.

Because it is a relative clause, and German always sets off relative clauses with commas.

So the structure is:

• Das Bilderbuch, das auf dem Nachttisch liegt, erzählt ...

The commas show that this middle part is extra descriptive information about das Bilderbuch.

This is stricter than in English. In German, those commas are not optional.

Because the gender of a German compound noun usually comes from the last part of the compound.

Bilderbuch is made of:

• Bilder = pictures
• Buch = book

Since das Buch is neuter, the whole compound is also neuter:

• das Bilderbuch

This rule is very useful with long German nouns.

For example:

• das Kinderbuch because das Buch
• der Esstisch because der Tisch
• die Haustür because die Tür

Because the subject is Das Bilderbuch, which is singular.

Even though Bilder inside Bilderbuch looks plural, the whole word Bilderbuch is one singular noun.

So the verb must agree with das Bilderbuch:

• Das Bilderbuch erzählt ...
• not erzählen

This is a common point of confusion with compound nouns.

The relative pronoun must match the noun it refers to in gender and number, but its case depends on its job inside the relative clause.

It refers to das Bilderbuch, which is:

• singular
• neuter

Inside the clause das auf dem Nachttisch liegt, the relative pronoun is the subject of liegt. So it must be nominative.

Neuter singular nominative relative pronoun = das

That is why we get:

• das Bilderbuch, das ... liegt

If it had a different function inside the relative clause, the form could change. For example:

• das Bilderbuch, das ich lese = das is the object
• das Bilderbuch, mit dem ich reise = dem after mit

German often prefers a more specific verb for position.

• liegen = to lie, to be lying, to be positioned horizontally
• stehen = to stand, to be upright
• sitzen = to sit
• sein = to be

A book on a table is typically thought of as lying, so German says:

• Das Buch liegt auf dem Tisch.

Using sein would usually sound less natural here, because German often describes the physical position more precisely than English does.

Yes. The relative clause simply adds extra information.

Without it, you get:

• Das Bilderbuch erzählt von einem kleinen Hund.

If you want to keep the same idea but use two sentences, you could say:

• Das Bilderbuch liegt auf dem Nachttisch. Es erzählt von einem kleinen Hund.

The original version sounds more connected and natural when you want to describe the book and then say what it is about.