How to disable address bar expansion in Mozilla Firefox 75?

Type in about:config in the address bar. This opens the Configuration Editor that lists Firefox settings known as preferences.

Set browser.urlbar.update1 to false, and restart the browser.

(Source: https://support.mozilla.org/en-US/questions/1274579)

Note, this solutions does not work as of Firefox 77

If you want to remove only the small expansion of the bar on new tab (or otherwise change the styling), you can use userChome.css. If you want to remove padding all the time, remove the ":not([open])" parts of the below.

/* based on https://old.reddit.com/comments/fwhlva//fmolndz */
#urlbar[breakout][breakout-extend]:not([open]) {
  top: calc((var(--urlbar-toolbar-height) - var(--urlbar-height)) / 2) !important;
  left: 0 !important;
  width: 100% !important;
}
#urlbar[breakout][breakout-extend]:not([open]) > #urlbar-input-container {
  height: var(--urlbar-height) !important;
  padding-block: 0px !important;
  padding-inline: 0px !important;
}
#urlbar[breakout][breakout-extend][breakout-extend-animate] > #urlbar-background {
  animation-name: none !important;
}
#urlbar[breakout][breakout-extend]:not([open]) > #urlbar-background {
  box-shadow: none !important;
}

(Source: https://bugzilla.mozilla.org/show_bug.cgi?id=1627861#c3)

If you've not used userChrome.css before, you'll need to enable it.

1. First, go to about:config, then set toolkit.legacyUserProfileCustomizations.stylesheets to true.
2. Open about:support, then click the "Open Folder" button under "Profile Folder"
3. Create a new directory called chrome.
4. Under the chrome directory, create a file called userChrome.css.

Add the rules specified above and restart Firefox.

If you want a more thoroughly modified address bar, userchrome.org now offers some interactive dropdowns where you can choose exactly how you want the bar to look, along with some screenshots showing you what it will look like.

The megabar pref browser.urlbar.update1 to allow going back to the old version of the bar will be removed entirely as of Firefox 77.

(Source: https://bugzilla.mozilla.org/show_bug.cgi?id=1627969)