From bone and wood to concrete and carbon fibre, composites are ubiquitous natural and engineering materials. Eshelby's inclusion theory describes how macroscopic stress fields couple to isolated microscopic inclusions, allowing prediction of a composite's bulk mechanical properties from a knowledge of its microstructure. It has been extended to describe a wide variety of phenomena from solid fracture to cell adhesion. Here, we show experimentally and theoretically that Eshelby's theory breaks down for small liquid inclusions in a soft solid. In this limit, an isolated droplet's deformation is strongly size-dependent with the smallest droplets mimicking the behaviour of solid inclusions. Furthermore, in opposition to the predictions of conventional composite theory, we find that finite concentrations of small liquid inclusions enhance the stiffness of soft solids. A straight-forward extension of Eshelby's theory, accounting for the surface tension of the solid-liquid interface, explains our experimental observations. The counterintuitive effect of liquid-stiffening of solids is expected whenever droplet radii are smaller than an elastocapillary length, given by the ratio of the surface tension to Young's modulus of the solid matrix.