Sheikh Rashîd al-Hasan, professor at King Khâlid University and firstly published in Islamtoday.net
Laughter is a truly human attribute. Islam, the natural religion, does not prevent people from laughing. The Prophet (peace be upon him) used to laugh and joke with his Companions, but he did not make it his habit to do so all the time.
When people tell jokes, they should abide by the following conditions:
1. The joke should not derogate any matter of faith, nor should it in any way belittle, injure, or mock other people. There are several verses in the Qur’ân that speak against such things.
2. Lies and falsehoods must not be employed as a means to make people laugh. The Prophet (peace be upon him) said: “Woe to the person who gives a speech to people and lies to make them laugh. Woe to him, woe to him.” [Sunan Abî Dâwûd (4990), Sunan al-Tirmidhî (2315), and Sunan al-Dârimî (2702)]
3. The joke should not cause anyone fear or intimidation.
4. Jokes should not be made on serious occasions or at times when people should be weeping. There is a proper time and place for everything. This is to be determined by simple good sense.
5. Jokes should be kept within reasonable limits in conformity with natural etiquette and good sense.
Many scholars have warned people against the excessive retelling of jokes and of becoming too fond of them. They did so because this makes it more likely for people to fall into one or more of the prohibitions mentioned above. If a Muslim focuses on what benefits him in his religious or worldly life, he will find that this suffices him from having to engage in a whole lot of unnecessary amusements and frivolous pastimes.