The difference is length: a novelette is the shorter of the two. The Science Fiction and Fantasy Writers Association (SFWA), whose Nebula Award categories are the most widely cited word-count benchmarks, defines a novelette as a work of at least 7,500 but fewer than 17,500 words and a novella as at least 17,500 but fewer than 40,000 words. Under the same rules, anything under 7,500 words is a short story and 40,000 words or more is a novel.
In practice, a novelette sits between a long short story and a novella, while a novella is long enough to be published as a slim standalone book. Other awards and publishers use similar but not identical cutoffs, so the exact boundaries can vary.
Source: SFWA, “Complete Nebula Awards Rules” (category word counts)
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