To make someone who's trying to seem important less important. Derives from the piss-boner men wake up with in the morning, it's a fake boner. If you took the piss away, there would be no boner. Do you see?

That's the original meaning, however taking the piss now means just giving someone a ribbing and in the most part not meaning to be malicious.
Original meaning:

Guy 1: "Hey guys, what do you think to my awesome new haircut?"

Guy 2: "I think you look like a fucking prick, mate...you look like a real slob".

Other guys: "Haha, Guy 2 really took the piss out of guy 1!"

Meaning as it is now:

Guy 1: "Man, I only got a 45 on my last assignment"

Guy 2: "Haha that's fucking shit!"

Guy 1: "Don't be so mean"

Guy 2: "Cheer up man, I was only taking the piss"
by L-Shizzle November 16, 2007
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To greedily demand an unreasonable effort or price.

British/Australian origins.
"My physics prof makes us go to 2 labs a week, and half the time we just end up using them to help him mark papers. He really takes the piss."
by Eversion April 15, 2005
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vb. Medical.

When one is asked to provide a urine sample at a hospital, clinic or doctor's surgery, one hands the jar to a nurse who is said to 'take the piss'.
I had to go to the clinic and the nurse took the piss out of me
by Ben Dover of the Yard September 4, 2004
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When a person (or group of people) is pissed off and they need to “take a piss” to get it out of their system.
You were a dickhead and now your best friend Is mad at you..

“Larry, you dickhead!”

“Alright, Ron, take a piss and calm down”

Or

In a heated situation in which everyone is angry ...

“Everyone take a piss and let’s resolve this.”
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It's is a British term that people often use to say 'are you joking' or 'are you serious'. 'Piss' means 'urine'. Someone who takes the piss a lot is often called a 'piss take' since they 'take the piss'.
A:sorry I ain't got your money today mate

B: are you taking the piss!?
by Light skin goddess January 18, 2018
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Phrase used when expressing shock or confusion, as if saying "you're lying!" or "you can't be serious" or "i don't believe you!" in a positive way.
A: "i just got engaged!"
B: "stop! you're taking a piss!"

or

A: "i just got robbed"
B:"you're taking a damn piss, when did this happen??"
by Ru_ox May 14, 2023
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