According to the Farlex Dictionary of Idioms, to cry (or say) uncle means to admit defeat and/or plead for mercy, especially in an informal physical contest of some kind.
It’s cited as an American phrase that came about in the early 1900’s attributed to bullying on the playground; however, there are also two other theories as to its true origin: Ancient Rome and 19th Century England.
The Roman theory suggests children who were in the throes of battle with a childhood bully were commanded to say “Patrue, mi Patruissimo” or “Uncle, my best Uncle” in order to be freed. Uncles at that time were given the same level of respect and regard as fathers were, and therefore the cry “uncle” was a way for the victim to grant the victor high status. The English theory states that it came from a joke regarding a parrot being coaxed into addressing his owner’s uncle.
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Wilton, Dave (2007-03-11). “say uncle”. Wordorigins.
Say (or cry) uncle, World Wide Words
Safire, William (2011-11-16). “Uncle cries “Uncle””. Language Maven Strikes Again. Knopf Doubleday Publishing Group.