Born John Orry Kelly at Kiama, New South Wales, he studied art in Australia, then sailed to New York in 1923, to become an actor. A job painting murals in a nightclub lead to work designing titles for Fox East Coast studios, and designed costumes and sets for Broadway's Schubert and George White revues.

While living in NYC in the early 1920s, openly gay artist Kelly shared an apartment simultaneously with Charlie Spangles, the star of the popular hermaphroditic nightclub act "Josephine and Joseph", and seventeen-year-old Archie Leach, later known as Cary Grant.

Kelly went to Hollywood in 1932 and worked at Warner Brothers First National Studios before moving on to Universal, RKO, Fox, and MGM. Designed costumes for all the great actresses, including Davis, Hepburn, and Chatterton.

He shared an Academy Award with Walter Plunkett and Irene Sharaff for An American in Paris (1951). He went on to receive Oscars for Les Girls (1957) and Some Like It Hot (1959), and earned a nomination for Gypsy (1963).

He was working on the film Kiss Me, Stupid when he died in Hollywood, California, of natural causes.