I use ElementaryOS, and since ElementaryOS is derived from Ubuntu, I thought this is the best place to ask for help.
I use mate-terminal in ElementaryOS. When creating tabs or cycling through tabs, the terminal window size keeps decreasing. Any idea on what's causing such behaviour?
It's likely the window manager that's causing this. I think the window manager in elementaryOS is part of the Pantheon desktop.
Sorry that's not terribly helpful, but I'd see if there's any settings for the window manager's behaviour or toward specific apps. I do develop a GTK-based app myself and have known elementaryOS to not honour the application's sizing request, i.e. it shrunk the window smaller then the dimensions requested.