Green’s Dictionary of Slang

1. to censor, to edit by cutting; thus as n. blue pencil, the act of censorship.

1882		Eve. Bulletin (Maysville, KY) 5 Aug. 1/4: A journal the size of the Times or the Tribune could be filled every night with good matter which the editors of those papers strike out of copy with their blue pencils.
1888		N.Y. Herald 29 July n.p.: The editor of the Century Magazine blue pencils magazine articles by the bushel [JSF].
1893		Kipling Many Inventions 167: The blue pencil plunged remorselessly through the slips.
1899		Daily News 17 Feb. in Ware (1909) 38/1: The actor will have a better chance after the blue pencil has eliminated the unnecessary verbiage in the dialogue.
1899		Princeton Union (MN) 2 Mar. 4/2: All the sensational stuff from the Phillippines is being ‘blue pencilled’ this week.
1901		Dundee Eve. Post 21 June 3/3: The new censor [...] is to be the judge [...] of what the newspapers ought to publish and if he disapproves [...] it is to be blue pencilled.
1909		J. Ware Passing Eng. of the Victorian Era.
1910		Sun. Times (Perth) 23 Jan. 2nd sect. 1/3: But what care the blue-pencil experts of the mongrel sheet, so long as the writer maligns the country which provides him with a crust of bread and a pint of ale.
1913		Day Book (Chicago) 5 Mar. n.p.: ‘But,’ protsted the young wirter, ’perhaps you could use this article if I were to boil it down?’ ‘No, good at all,’ replied the man behind the blue pencil.
1915		E. Poole Harbor (1919) 279: ‘Why not have blue-pencilled some of this?’ I asked [...] ‘Because Joe believes in free speech, I suppose,’ Sue answered.
1917		B.E.F. Times 5 Mar. (2006) 178/1: E for the editor, ruddy in hew, / He’d blue-pencil this if I said all I knew.
1921		N.Y. Tribune 19 June 63/4: The dry’s Champion [...] Major Hayes is also [...] active in Ohio politics and temperance matters. The Anti-Saloon league has given him its official blue pencil.
1929		W. Winchell On Broadway 12 Aug. [synd. col.] The censors [...] threatened [...] that unless a scene was re-taken the entire film would be blue-penciled.
1935		E. Freeman ‘The Whirling Hub’ in Afro-American (Baltimore, MD) 29 June 15/1: The blue-pencil boys will never let that pass.
c.1939		B. Bennett ‘The Broadcaster’ [music hall script] And from Poets’ Corner there’s blue-pencil Warner / In ‘There was a young lady from Gloucester’.
1942		W. Winchell ‘On Broadway’ 24 Mar. [synd. col.] That Sutton Hotel murder case will unravel sensational allegations. The alleged ‘inside’ will probably be blue-penciled.
1949		Wodehouse Mating Season 89: I used to take my English essay to be blue-pencilled by the Rev. Aubrey Upjohn.

2. in ext. use, to bring to a conclusion.

1905

A. Binstead Mop Fair 49: Odious P.C. 797 has arrived from the clouds and blue-pencilled the show.