Of Irish descent, Kelly was born in Lowell, Massachusetts, into a theatrical family. Her mother was silent film actress Nan Kelly, who coached her and managed her career. As a child actress, Kelly appeared in 52 films made on the East Coast by the age of 17. Her younger brother was actor Jack Kelly, most noted for playing the role of Bart Maverick, one of the leads (alongside James Garner, Roger Moore or Robert Colbert) in the ABC television series Maverick (1957-1962). The Kelly siblings, who resembled each other, is not currently known to have worked together in film or television.
Kelly was educated at Bentley School for Girls, Immaculate Conception Academy, and St. Lawrence Academy.
As a child model, her image had appeared in so many different advertisements by the time she was nine years old that Film Daily commented, "Nancy has been referred to as 'the most photographed child in America,' largely because of her commercial posing."

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