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Background: The Wizard of Oz is a movie musical where a young lady named Dorothy and her dog Toto somehow wind up in a mysterious land called Oz when a tornado literally lifts her Kansas home from the foundation with her and Toto inside of it. She and several other characters that she meets along the way in their quest to see the Wizard of Oz all have wishes that they want granted: Dorothy wants herself and Toto returned to their home, the Scarecrow wants a brain, the Tin Man wants a heart, and the Cowardly Lion wants courage.
Munchkin

The hanging "munchkin"

Many dwarves were also cast as a series of characters named Munchkins. In a ghoulish behind the scenes tale, at one point where most of the characters in Dorothy's troupe (minus the Cowardly Lion) are following the Yellow Brick Road that is to lead to the Wizard, movement in the background before the scene ends is reportedly one of the dwarves hanging himself from a tree on the set.

It was reportedly believed a male munchkin had fallen in love with a female munchkin on the set, but was driven to despair when she did not love him back, thus causing him to hang himself. 

Status: False. No actor name, nor death certificate has ever been released of this alleged incident. With the movie industry being pretty new at the time, this could have warranted enough controversy (if this event actually happened) to cause the film’s release to be delayed, if not banned altogether, as only seven years before, a movie called Freaks was banned, which, several decades later, is still banned to this day in some countries (even though no set death occurred, the movie was banned because real human freaks were used in the film). Real life birds were allowed to wander the sets in order to add a touch of realism, as this movement during the scene in question was just a big bird in the background stretching its wings. The wings were more prominent in the remastered version, further adding to the rumor the suicide was edited out.

The rumor was further debunked in ScareTheater's video covering the legend, proving the original film was doctored to make the bird look more human-like as the bird was always there and you can make out the tip of its wings along the tree which show the wings were cropped out. Another thing debunking the rumor is the fact the film crew and actors in the scene such as Judy Garland fail to notice the hanging munchkin despite being in direct eyesight during the Yellow Brick Road scene. If this had been a real dead body, chances are someone would have reacted and it would have been edited out of the film immediately.