der Teddy
teddy bear
A toy in the shape of a bear, made of plush or another soft fabric. Short form of Teddybär.
Das kleine Kind schlief mit seinem Teddy im Arm ein.
The small child fell asleep with his teddy bear in his arms.

teddy / teddy bear
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teddy bear
A toy in the shape of a bear, made of plush or another soft fabric. Short form of Teddybär.
Das kleine Kind schlief mit seinem Teddy im Arm ein.
The small child fell asleep with his teddy bear in his arms.

Whether the toy or the lingerie is meant is always clear from the context. If the sentence is about children, playing, or sleeping, the bear is meant. If it is about fashion, clothing, or underwear, the lingerie item is meant.
Mein Neffe kann ohne seinen Teddy nicht einschlafen.
My nephew can't fall asleep without his teddy bear.
'Teddy' is the common short form of 'Teddybär' (teddy bear). The name goes back to U.S. President Theodore 'Teddy' Roosevelt, who refused to shoot a tied-up bear while hunting.
Fast jedes Kind in Deutschland hat einen Teddybären.
Almost every child in Germany has a teddy bear.
When referring to the toy, 'Teddy' (teddy bear) is often used with verbs like 'kuscheln' (to cuddle), 'drücken' (to squeeze/hug), or 'im Arm halten' (to hold in one's arms), and adjectives like 'weich' (soft) and 'flauschig' (fluffy).
Sie drückte ihren flauschigen Teddy ganz fest.
She hugged her fluffy teddy bear very tightly.
bodysuit / body
'der Body' and 'der Teddy' can both mean one-piece, tight-fitting garments. That is why they can easily be confused. 'Der Body' is more general: it covers the upper body and is often fastened at the crotch. Babies wear bodysuits, and for adults a 'Body' can also be worn as a top or as underwear. In this meaning, 'der Teddy' refers to a specific item of women’s lingerie that combines a top and panties. Important: 'Teddy' can also mean a teddy bear, but in clothing language it is much more specific than 'Body'.

Im Wäschegeschäft sucht sie einen schwarzen Teddy für einen besonderen Abend.
At the lingerie store, she looks for a black teddy for a special evening.
Für das Baby kauft Maria einen warmen Body aus Baumwolle.
Maria buys a warm cotton bodysuit for the baby.