Two examples:
Katy Lied by Steely Dan. The album’s title is the first words from the song Doctor Wu.
Whatever and Ever Amen by the Ben Folds Five. The title is a lyric from The Battle of Who Could Care Less.
I love it when albums do this. It’s so much more unique than naming the album after one of the song titles. What are some other ones?
Spin Doctors - Pocket Full of Kryptonite (From Jimmy Olsen’s Blues).
XTC did this a few times - using a lyric from a previous album. I believe Oranges and Lemons was a lyric from a song on Skylarking. The next album, Nonsuch, was also a lyric from a track from Oranges and Lemons. Andy Partridge claimed that this was just coincidence - but they named a later album Apple Venus, which is a lyric from yet another XTC album…
I can think of two offhand. Both of the titles are found in the first track of the album; I wonder if that happens a lot.
Nevermind, by Nirvana. The word pops up in the last verse of Smells Like Teen Spirit.
Hail to the Thief, Radiohead. The title phrase is near the end of the first song, 2+2=5.
**Jagged Little Pill ** by Alanis Morrisette comes to mind…
Grateful Dead…Wake of the flood
Under the Table and Dreaming by Dave Matthews Band
Come to think of it, Radiohead sort of did this twice. The title of Pablo Honey comes from the third song, How Do You? Thing is that it’s not a lyric, it’s a sample of The Jerky Boys. I’m not sure how that counts. 
Besides Alanis?
Alan Jackson’s A Lot About Livin’ and a Little 'Bout Love.
A quick look through my albums reveals the following:
The Decemberist’s excellent Castaways and Cutouts takes its name from the final track, “California One/Youth and Beauty Brigade”
Iron & Wine’s Our Endless Numbered Days is also from a line in the last track, “Passing Afternoon”
The title of The Shin’s first album, Oh! Inverted World, is from “One by One All Day” second album, Chutes to Narrow, is from “Young Pilgrims”
The Strokes Room on Fire paraphrased a line from “Reptilia”
Bad Religion - Process of Belief (from “Materialist”)
Maximo Park - A Certain Trigger (“Once, a Glimpse”)
Every Pixies album except Trompe le Monde
[ul]
[li]Doolittle (“Mr. Grieves”)[/li][li]Come on Pilgrim (“Levitate Me”)[/li][li]Surfer Rosa (“Oh My Golly”)[/li][li]Bossanova (“Hang Wire”)[/li][/ul]
Paul McCartney - Flowers In The Dirt is a phrase from the song “That Day Is Done.”
Kim Mitchell - Shakin’ Like A Human Being is a line from a song on that album that I can’t remember now that I want to.
Kim’s previous band, Max Webster’s “Universal Juveniles” is from the song “Chalkers.”
Elvis Costello - My Aim Is True is from “Alison.”
Golden Earring - Moontan is from a line in “Vanilla Queen”.
Tom Waits’ “Nighthawks At The Diner” is from “Eggs And Sausage.”
Also* Last Year’s Model* from “I Don’t Want to go to Chelsea”.
Wow, I’m going to feel like a nerd for posting this, but:
They did a variant on this with the song “Ana” on Bossanova. The lyrics form an acrostic, in which the first letters of each line spell out “SURFER”:
This being, one presumes, a reference to an earlier album, Surfer Rosa.
From my personal collection:
Midnight Oil - Diesel And Dust (Warukana)
Shawn Colvin - A Few Small Repairs (Sunny Came Home)
Also have Pocket Full of Kryptonite.
The Shins’ latest album, Chutes Too Narrow. The title is a lyric from the song Young Pilgrims:
“I fell into a winter slide and ended up the kind of kid who goes down chutes too narrow.”
Sarah Slean’s Night Bugs is another; the title comes from the song Book Smart Street Stupid:
“With only the night bugs to lead me home with their sad luck serenade.”
No, I don’t think it’s nerdy, because I might out nerd you. On Frank Black’s second solo album, Teenager of the Year, the song “Speedy Marie” does the same:
I think she was his girlfriend at the time.
Slight hijack, sorry.
Depeche Mode, a few times -
“Construction Time Again” (1983) from the song “Pipeline”
“Some Great Reward” (1984) from the song “Lie to Me”
“Playing the Angel” (2005) from the song “The Darkest Star”
Elton John’s Ice on Fire album was named after a line in the song “Nikita”… “With eyes that looked like ice on fire…”
Dire Straits’ Making Movies was from a phrase within Skateaway.