Actually, “Love is the Seventh Wave” quotes from “Every Breath You Take.”
A couple more I can think of – they also reference “Needles and Pins” and mention (although I don’t think they quote from) “In The Mood”.
Water Colors Into the Ocean by Destroyer:
Oh, life, it’s bigger/than a life on the run from the United States and her friend on this night made of jewels
I love the fact that he’s quoting something as recent as REM, and not going all the way back to the 60s like most lyric quotes do.
I like it we can both be right! I do seem to remember him quoting lines from “Every Breath” in “Seventh Wave.” But I stand by my original assertion. I’ll try to find the right song tonight.
Elton John’s “Crocodile Rock” references “Rock Around the Clock” by Bill Haley:
While the other kids were rockin round the clock
Me and Susie were boppin’ doin’ the Crocodile Rock
And “American Pie” by Don McClean contains lyrical references to “Eight Miles High” by The Byrds and “That’ll Be the Day” by Buddy Holly, “Helter Skelter” by The Beatles and “Jumpin’ Jack Flash” by the Rolling Stones.
They also changed ‘prophets’ to ‘profits’, since the song was about, well…
The Kinks’ “Destroyer” references their own “Lola”:
Met a girl called Lola and I took her back to my place. It also recycles the riff from “All Day and All of The Night”
Tom Petty - “Running Down A Dream”:
Me and Del were singing
Little Runaway
referring to Del Shannon
Eddie Money’s Take Me Home Tonight. I believe it actually has Ronnie singing “be my llittle baby” after Eddie sing “Just like Ronnie said”.
Ooh, and that’s another song that is quoted in The Lamb Lies Down on Broadway!
Some people Call me the Space Cowboy
Some Call me The Gangster Of Love
Some call me Peter Morris
Cause I sing of the puppetutes of love
I opened the thread to mention Feed the Fire (and I was going to wave to you, Equipoise, and everything 
).
Oh well. Talking New Bob Dylan by Loudon Wainwright III has a few:
My kid cranked up her boom-box to almost grown
When I heard you screamin’ from her room
“Everybody must get stoned.”
Thanks a lot, Bob.
Journey’s Raised on Radio.
The Righteous Brothers’ “Rock and Roll Heaven” is full of references. It should be; it mentions a number of dead rock stars and their hit songs. A couple of examples:
And Otis brought us all to the dock of a bay,
Sing a song to light my fire
Remember Jim that way
In addition to Otis Redding and Jim Morrison, there are references to Janis Joplin (“Another Piece of my Heart”), Bobby Darin (“Mack the Knife”), Jim Croce (“Bad Bad Leroy Brown”), and Jimi Hendrix (“Purple Haze,” I think).
Lyrics from my Queen’s Love Song, a little-known duet with Prince from her Like A Prayer album:
“Time goes by so slowly/for those who wait/and those who run/seem to have all the fun”
…Was recycled for a fairly recent, much more well-known hit.
She also re-used Vogue’s "You’ve got to/let your body/move to the music/you’ve got to/let your body/go with the flow" in Deeper And Deeper, which was the second single off of her Erotica album.
The Punk Meets the Godfather by the Who refers to and quotes from “My Generation.”
Driving Sister by Mott the Hoople mentions their earlier song “Half Moon Bay.”
And the Band Played Waltzing Matilda mentions Waltzing Matilda, of course.
Jim himself sang about Otis and the “dock of the bay” in the Doors’ “Runnin’ Blue.”
Charlie Daniels Band - Reflections
“It was October in St. Louis town,
When we heard that the Free Bird had fell to the ground”
:eek: Tragedy barely averted then, because if I had come into this (or any other) thread and saw that someone mentioned Happy Rhodes before me, I would have had a heart attack in sheer shock!
Though, don’t let that stop you from doing it at another time in another thread. 
Somebody here who’s heard of “Feed The Fire” - Oh my god I can’t believe it!
And don’t forget, “The Light Dies Down On Broadway” on that same album references “The Lamb Lies Down On Broadway”!
One more Happy tidbit, but it would take an ardent Queen fan to find the references. Happy was a huge, HUGE Queen/Freddie Mercury fan, and was crushed when Freddie died. She wrote a song about him, but was never satisfied enough with it to release it officially. It was given to her fans on a special fan-only release. Here are the lyrics. I know she must reference specific songs, but I’m fairly ignorant about Queen so I can’t pick them out. If a Queen fan does click on the link and recognizes lines from specific songs, I’d be very greatful if you could tell me what songs and what albums they’re on. I could add that information to that page’s credits section.
Long time lurker, first time poster as this subject really interests me 
First my example of songs that reference other songs: Titles by Barclay James Harvest. The lyrics of the song consist of the titles of Beatles songs. (http://www.lyricsdomain.com/2/barclay_james_harvest/titles.html)
I followed the link to the unpublished Happy Rhodes with interest.
I am not a total Queen fanatic, mostly partial to their old early 70s work, I’m quite sure the song linked drew inspiration from the fantasy world Freddy Mercury created called "Rhye "and set several songs in, most notably Seven Seas of Rhye and My Fairy King, both included on Queen’s self-title debut album and referenced in the song.
The “laser beam” comes from “Killer Queen”