Green’s Dictionary of Slang

(US) an excl. used to signify one’s surrender, usu. in a physical confrontation.

1976		N. Thornburg Cutter and Bone (2001) 184: And finally the girl caught on. ‘Uncle! Uncle!’ she cried. Cutter got off her then, mugging triumph.
1987		in Delacoste & Alexander Sex Work (1988) 51: If the ‘victims’ want to yell stop but mean go, there is always a code word or key that really means they’ve had enough. This is usually ‘mercy,’ or ‘uncle.’.