köstlich
delicious
Tasting very good.
Vielen Dank für das Abendessen, es war wirklich köstlich!
Thank you very much for dinner; it was truly delicious!

delicious / delightful
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delicious
Tasting very good.
Vielen Dank für das Abendessen, es war wirklich köstlich!
Thank you very much for dinner; it was truly delicious!

Careful, 'köstlich' (delicious/delightful) is a false friend! It looks like the English word 'costly' (teuer), but it means 'very tasty' or 'very amusing.'
Der Kuchen war köstlich, aber zum Glück nicht teuer.
The cake was delicious, but fortunately not expensive.
The word 'köstlich' (delicious/delightful) is historically related to 'Kosten' (costs). It originally meant 'precious' or 'valuable,' from which the modern meaning 'especially good' developed.
Früher galten Gewürze als eine köstliche und teure Ware.
In the past, spices were considered a precious and expensive commodity.
In the meaning 'amusing,' 'köstlich' (delightful/hilarious) is very often used in the fixed expression 'sich köstlich amüsieren' (to have a wonderful time / to be highly amused). It means that someone is having a lot of fun or laughing a lot.
Das Publikum amüsierte sich köstlich über den Komiker.
The audience was highly amused by the comedian.
The two meanings are easy to distinguish from context. If it is about food and drink, 'köstlich' (delicious) means 'very tasty.' If it is about entertainment, jokes, or stories, it means 'very amusing.'
Der Wein zu diesem Gericht ist köstlich.
The wine with this dish is delicious.
funny
'lustig' and 'köstlich' can both describe something as very amusing. 'lustig' is the normal everyday word for something that makes you laugh or creates a good mood. In this meaning, 'köstlich' sounds a little stronger and often more refined: you use it when you find something especially amusing or are having a very good time. Important: 'köstlich' can also mean 'very delicious', but in this relation the focus is on humor and entertainment.

Bei der alten Geschichte hat sich die ganze Familie köstlich amüsiert.
The whole family was highly amused by the old story.
Der Film war so lustig, dass wir die ganze Zeit lachen mussten.
The film was so funny that we had to laugh the whole time.