כשהוא היה קטן, הוא היה מספר לי על חלום יפה ואז היה מחייך.

כשהוא means when he.

It is made from:

• כש־ = when
• הוא = he

So:

• כשהוא היה קטן = when he was little

In Hebrew, short words like כש־ often attach directly to the next word.

Because it is doing two different jobs here.

1. In כשהוא היה קטן, היה simply means was:

   • הוא היה קטן = he was little

2. In היה מספר and היה מחייך, the combination היה + present form expresses a habitual past:

   • היה מספר = he used to tell / he would tell
   • היה מחייך = he used to smile / he would smile

So the sentence is describing something repeated in the past, not just one single event.

Yes. By themselves, they are present-tense forms:

• מספר = telling / tells
• מחייך = smiling / smiles

But after היה, they often describe a repeated action in the past:

• היה מספר = used to tell
• היה מחייך = used to smile

This is a very common Hebrew pattern.

You could, but the meaning would change.

• הוא סיפר לי על חלום יפה ואז חייך = He told me about a beautiful dream and then smiled
  This sounds like one specific event.

• הוא היה מספר לי על חלום יפה ואז היה מחייך = He would tell me about a beautiful dream and then smile
  This sounds habitual or repeated, like something he often did.

So היה + participle is important here because it gives the idea of used to.

Yes, קטן literally means small, but when talking about a child it often means little or young.

So:

• כשהוא היה קטן = when he was little / when he was young

This is extremely natural in Hebrew. It does not sound strange the way small might sound in English.

The second הוא is the subject of the main clause:

• כשהוא היה קטן, = when he was little,
• הוא היה מספר לי... = he used to tell me...

Hebrew often repeats the subject after an opening subordinate clause, and that is very normal.

Could it be omitted? Sometimes, yes, especially in more flowing speech or writing, but keeping it makes the sentence clearer and more natural for many contexts.

Because the verb here is being used as לספר על = to tell about.

So:

• לספר לי על חלום יפה = to tell me about a beautiful dream

Here:

• לי = to me
• על חלום יפה = about a beautiful dream

You use את with a definite direct object, but here the structure is:

• tell someone about something

So על is the natural preposition.

Because Hebrew often places the indirect object pronoun right after the verb.

So:

• היה מספר לי על חלום יפה

breaks down as:

• היה מספר = used to tell
• לי = to me
• על חלום יפה = about a beautiful dream

This order is very natural in Hebrew. English also often does something similar:

• he would tell me about a beautiful dream

ואז means and then.

So:

• ואז היה מחייך = and then he would smile

It connects the two repeated actions in sequence:

1. he would tell me about the dream
2. then he would smile

In this sentence, would smile or used to smile is better.

That is because היה + present form usually gives a repeated/habitual sense.

So:

• חייך = smiled (one event)
• היה מחייך = would smile / used to smile (repeated behavior)

The dictionary form is לספר = to tell.

Important note: לספר can also mean to cut hair, depending on context, because Hebrew roots can produce more than one meaning. But here, with לי על חלום, it clearly means to tell.

So:

• מספר here = telling
• היה מספר = used to tell

The dictionary form is לחייך = to smile.

So:

• מחייך = smiling / smiles
• היה מחייך = used to smile / would smile

This is a very common verb and useful to recognize in the היה + participle pattern.

Because in Hebrew, adjectives usually come after the noun.

So:

• חלום יפה = a beautiful dream

This is the normal Hebrew order:

• noun + adjective

Also, the adjective must agree with the noun in gender and number.
Here חלום is masculine singular, so יפה is masculine singular in pronunciation here: yafé.

Because כשהוא היה קטן is an opening time clause: when he was little.

After that, the main clause begins:

• הוא היה מספר לי...

So the comma helps separate:

• the background/time clause from
• the main statement

In modern Hebrew punctuation, this is very normal.