c. 1200, Sexun, Saxun, "member of a people or tribe formerly living in northern Germania who invaded and settled in Britain 5c.-6c.," from Late Latin Saxonem (nominative Saxo; also source of Old French saisoigne, French Saxon, Spanish Sajon, Italian Sassone), usually found in plural Saxones, probably from a West Germanic tribal name (represented by Old English Seaxe, Old High German Sahsun, German Sachse "Saxon").
This is traditionally regarded as meaning "warrior with knives" (compare Middle English sax, Old English seax, Old Frisian, Old Norse sax "knife, short sword, dagger," Old High German Saxnot, name of a war-god), from Proto-Germanic *sahsa- "knife," from PIE root *sek- "to cut." But Watkins considers this doubtful.
The word figures in the oft-told tale, related by Geoffrey of Monmouth, who got it from Nennius, of the treacherous slaughter by the Anglo-Saxons of their British hosts:
Accordingly they all met at the time and place appointed, and began to treat of peace; and when a fit opportunity offered for executing his villany, Hengist cried out, "Nemet oure Saxas," and the same instant seized Vortigern, and held him by his cloak. The Saxons, upon the signal given, drew their daggers, and falling upon the princes, who little suspected any such design, assassinated them to the number of four hundred and sixty barons and consuls ....
The OED editors helpfully point out that the murderous shout in correct Old English (with an uninflected plural) would be nimað eowre seax. For other Germanic national names that may have derived from characteristic tribal weapons, see Frank, Lombard. Celtic languages used their form of the word to mean "an Englishman, one of the English race" or English-speaking person in Celtic lands (for example Welsh Sais, plural Seison "an Englishman;" Seisoneg "English;" compare Sassenach).
As an adjective from late 14c. (earlier was Saxish, c. 1200); in reference to the later German state of Saxony (German Sachsen, French Saxe) in central Germany it is attested by mid-14c. Bede distinguished the Anglo-Saxons, who conquered much of southern Britain, from the Ealdesaxe "Old Saxons," who stayed in Germany.