In the first half of the last century, America was on the rise in the world, and there seemed to be an exuberance in the language, which is sort of silly in retrospect. From earlier slang like "absquatulate", they moved on to stuff like "twenty-three skidoo" and finally to the song "Mairzy Doats". So, after finding the following on the web, I vote for "it just sounded nutty in an American way" so people liked it:\n\nThe Oxford English Dictionary records the expression  bee's knee as meaning the type of something small or insignificant from 1797. The plural form is US slang dating from the 1920s, when there was an explosion of terms meaning 'the acme of excellence': compare the cat's whiskers/pyjamas. The first example is dated 1923. Some of these have lasted, and some have not (the flea's eyebrows, the canary's tusks).\n\nOR \n\nA bee's "corbiculae", or pollen-baskets, are located on its\ntibiae (midsegments of its legs).  The phrase "the bee's knees", meaning "the height of excellence", became popular in the U.S. in the 1920s, along with "the cat's whiskers" (possibly from the use of these in radio crystal sets), "the cat's pajamas" (pyjamas were still new enough to be daring), and similar phrases which made less sense and didn't endure:  "the eel's ankle", "the elephant's instep", "the snake's hip".  Stories in circulation about the phrase's origin include:  "b's and e's", short for "be-alls and end-alls"; and a corruption of "business".