O GNU é um acrônimo recursivo, G NU N ot U NIX
Foi escolhido porque:
The name “GNU” was chosen because it met a few requirements; first, it was a recursive acronym for “GNU's Not Unix”, second, because it was a real word, and third, it was fun to say (or Sing).
Veja esta página da web GNU para mais informações históricas sobre o nome.