1610s, "characteristic of hysteria," the nervous disease originally defined as a neurotic condition peculiar to women and thought to be caused by a dysfunction of the uterus; literally "of the womb," from Latin hystericus "of the womb," from Greek hysterikos "of the womb, suffering in the womb," from hystera "womb," from PIE *udtero-, variant of *udero- "abdomen, womb, stomach" (see uterus). Compare hysteria.
Meaning "very funny" (by 1939) is from the notion of uncontrollable fits of laughter. For "inclined to hysteria," American English formerly had the colloquial hystericky (1792). Related: Hysterically.