“Farmer Giles of Ham” is a satirical story by J. R. R. Tolkien. It is full of humour and allusions. The diversity of these elements allows for a detailed linguistic study distinguishing different levels at which the humour can be found and the different ways in which it is achieved. In the present paper, we attempt to discuss these devices and levels of humour and draw some conclusions on their effects. Our study is reinforced by a discussion of theoretical preliminaries of humour analysis, including the classification of the different levels, forms and devices of humour, as well as a brief discussion of the most widely acknowledged theory of humour - the incongruity theory. Using this theoretical framework, we explore the possibilities of viewing the phenomenon of humour in literature from a linguistic perspective and attempt to show the utility of this perspective in literature studies.