I have heard it used in a negative sense. For example, "rudeness does not become you" etc.
Is this phrase used in a positive context as well? (like "generosity becomes you")?
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becoming can mean the obvious - changing into, growing into, happening, coming about. It also has a second meaning - "to look well"
The word started to be used in this manner in the early 14th century, from the earlier sense of "to agree with, be fitting" (early 13th century).
Similarly there is "comely", which means handsome, lovely, splendid.
Therefore, "generosity becomes you" means "generosity looks well on/is fitting on you" (essentially, it makes you look good). "Rudeness does not become you" means "rudeness does not look well on/does not fit you" (essentially, it makes you look bad).
You can also use the word "unbecoming" as a negative. "Your rudeness is unbecoming."
Become is being used in the sense of "suits you"...e.g., crime does not become you (i.e., you're a crappy criminial), "that dress becomes you" (you look good in it) etc.
It's in the dictonary as a second definition.