The "FU" line is a great example of something called a "self cleaning" joke. Even back then, you could get away with all kinds of stuff if the next line made it clear that any dirty interpretation is all in your mind.

The hilarity of the "FU" line is a combination of the line and Matthau's delivery.
Two other favorites of mine are mostly funny due to Matthau's New-York accented delivery (which I tried to reproduce I do know how to spell, honest!):
"Now it's Gawwbage."
"I know him. He'll kill himself just to spite me. Then his ghost will come back, following me around the apartment, hawwnting and cleaning, hawwnting and cleaning, hawwnting and cleaning."

That line was brilliant, but I found it even funnier when Oscar says, "I don't know, I thought the gravy comes when you cook the meat."

He says they are out if cornflakes not milk

It took me 3 hours to realize that FU was Felix Unger! - danegem
Yepmy favorite line!
It's the setup that makes it great: "'Oscar, we're out of milk. FU.'" Oscar probably spent the first hour fuming that Felix was blaming him for it and then insulting him about it.
"We hear very little, and we understand even less." - Refugee in Casablanca

A poster above thought there was something wrong with the delivery of that line. I disagree, and think it is brilliant! One of the funniest lines in the movie!
Joe

Such a simple line brilliantly executed, with hysterical results!
I've seen some comedies that strive to be funny with complicated set-ups or cheap knockdowns that never work. And yet here we have our beloved Walter deliver such an awesome line that lives on to this day and still makes people laugh out loud!
Script-writers take note of the old saying: "keep it simple, stupid!"
"One must first get behind someone, in order to stab them in the back!"

I was laughing through this whole movie but that was without a doubt the funniest line. I was laughing so hard I had to pause the movie until I could stop.
"The comfort of the rich depends upon an abundant supply of the poor."

• Voltaire

When I was transcribing doctors office notes, he wrote "Patient will FU in six weeks." What??? That's no approved abbreviation, so I asked him what he meant by it. "Follow up" of course, but for a while I thought the stressors of the job had caused him to finally snap.

He lifts me clear to the sky, you know he taught me to fly.

That's the best part of this whole movie. Unfortunately something went wrong with the delivery of the lines and it's funnier to read the play this was based on than to actually see the film.

Best line in a movie of memorable lines.
Do you understand the words that I am saying to you?

Actually he says "figure out" instead of "realize", which (at least to me) sounds even funnier.
Rome. By all means, Rome.

I honestly think that it's the greatest movie quote ever. I think it has a lot to do with Walter Matthau's delivery.
Agreed, perfect delivery.
My favorite quote from him in the film too LOL
"I'm the ultimate badass,you do NOT wanna f-ck wit me!"Hudson,Aliens

OMG, thank god.
I laughed so hard when I heard this line a few minutes ago when I watched the film and I didn't know why. I immediately checked the IMDB to see if there are others out there that find that line hillarious and I found you.
One of the best quotes in the movie.
To imagine how Felix put little notes on the pillow and sign them whith his initials is just so damn funny.

LOL! This line is one of my favourites in the film! So friggin' hilarious the way Walter delivers it.
Marilyn Monroe: I don't want to be rich. I just want to be wonderful.

I honestly think that it's the greatest movie quote ever. I think it has a lot to do with Walter Matthau's delivery.
"Teller of untruths, teller of untruths, your trousers have combusted!"

me too!

This message has been deleted.

Me too! I don't know why, but everytime I hear it I laugh like a crazy person.