Although he is known today for his performance in Singin' in the Rain, he was a dominant force in Hollywood musical films from the mid 1940s until this art form fell out of fashion in the late 1950s. His many innovations transformed the Hollywood musical film, and he is credited with almost single-handedly making the ballet form commercially acceptable to film audiences.

Kelly was the recipient of an Academy Honorary Award in 1952 for his career achievements. He later received lifetime achievement awards in the Kennedy Center Honors, and from the Screen Actors Guild and American Film Institute; in 1999, the American Film Institute also numbered him 15th in their Greatest Male Stars of All Time list.

He was the third son of James Kelly, a phonograph salesman, and Harriet Curran, who were both children of Irish Roman Catholic immigrants. He was born in the Highland Park neighbourhood of Pittsburgh, Pennsylvania and, at the age of eight, was enrolled by his mother in dance classes, along with his elder brother James. They both rebelled, and, according to Kelly: "We didn't like it much and were continually involved in fistfights with the neighborhood boys who called us sissies...I didn't dance again until I was fifteen." He thought it would be a good way to get girls. Kelly returned to dance on his own initiative and by then was an accomplished sportsman and well able to take care of himself. He attended St. Raphael School Elementary School In the Morningside neighborhood of Pittsburgh, PA. He graduated from Peabody High School in 1929. He enrolled in Pennsylvania State College to study journalism but the economic crash obliged him to seek employment to help with the family's finances. At this time, he worked up dance routines with his younger brother Fred in order to earn prize money in local talent contests, and they also performed in local nightclubs.

In 1930, Kelly's family started a dance studio on Munhall Road in the Squirrel Hill neighborhood of Pittsburgh. In 1931, he enrolled at the University of Pittsburgh to study economics where he joined the Phi Kappa Theta fraternity and earned a Bachelor of Arts in Economics in 1933. In 1932, the dance studio was renamed The Gene Kelly Studio of the Dance. A second location was opened in Johnstown, Pennsylvania in 1933. While still an undergraduate student and later as a student at the University of Pittsburgh Law School, Gene was a teacher at the dance studio. In 1931, he was approached by the Rodef Shalom synagogue in Pittsburgh to teach dance and stage the annual Kermess and was so successful that his services were retained for seven years until his departure for New York. Eventually, though, he decided to pursue his career as a dance teacher and entertainer full-time and so dropped out of law school after two months. He began to focus increasingly on performing, later claiming: "With time I became disenchanted with teaching because the ratio of girls to boys was more than ten to one, and once the girls reached sixteen the dropout rate was very high." In 1937, having successfully managed and developed the family's dance school business, he moved to New York City in search of work as a choreographer.

After a fruitless search, Kelly returned to Pittsburgh, to his first position as a choreographer with the Charles Gaynor musical revue Hold Your Hats at the Pittsburgh Playhouse in April, 1938. Kelly appeared in six of the sketches, one of which, "La Cumparsita", became the basis of an extended Spanish number in Anchors Aweigh eight years later.

His first Broadway assignment, in November 1938, was as a dancer in Cole Porter's Leave It to Me! as the American ambassador's secretary who supports Mary Martin while she sings "My Heart Belongs to Daddy". He had been hired by Robert Alton who had staged a show at the Pittsburgh Playhouse and been impressed by Kelly's teaching skills. When Alton moved on to choreograph One for the Money he hired Kelly to act, sing and dance in a total of eight routines. His first career breakthrough was in the Pulitzer Prize-winning The Time of Your Life, which opened on November 11, 1939, where for the first time on Broadway he danced to his own choreography. In the same year he received his first assignment as a Broadway choreographer, for Billy Rose's Diamond Horseshoe. His future wife, Betsy Blair, was a member of the cast. They began dating and married on October 16, 1941.

In 1940, he was given the leading role in Rodgers and Hart's Pal Joey, again choreographed by Robert Alton, and this role propelled him to stardom. During its run he told reporters: "I don't believe in conformity to any school of dancing. I create what the drama and the music demand. While I am a hundred percent for ballet technique, I use only what I can adapt to my own use. I never let technique get in the way of mood or continuity." It was at this time also, that his phenomenal commitment to rehearsal and hard work was noticed by his colleagues. Van Johnson who also appeared in Pal Joey recalled: "I watched him rehearsing, and it seemed to me that there was no possible room for improvement. Yet he wasn't satisfied. It was midnight and we had been rehearsing since eight in the morning. I was making my way sleepily down the long flight of stairs when I heard staccato steps coming from the stage...I could see just a single lamp burning. Under it, a figure was dancing...Gene."

Offers from Hollywood began to arrive but Kelly was in no particular hurry to leave New York. Eventually, he signed with David O. Selznick, agreeing to go to Hollywood at the end of his commitment to Pal Joey, in October 1941. Prior to his contract, he also managed to fit in choreographing the stage production of Best Foot Forward.

Selznick sold half of Kelly's contract to MGM and loaned him out to MGM for his first motion picture: For Me and My Gal (1942) with Judy Garland. Kelly was "appalled at the sight of myself blown up twenty times. I had an awful feeling that I was a tremendous flop" but the picture did well and, in the face of much internal resistance, Arthur Freed of MGM picked up the other half of Kelly's contract. After appearing in the B-movie drama Pilot #5 he took the male lead in Cole Porter's Du Barry Was a Lady opposite Lucille Ball. His first opportunity to dance to his own choreography came in his next picture Thousands Cheer, where he performed a mock-love dance with a mop.

He achieved his breakthrough as a dancer on film, when MGM loaned him out to Columbia to work with Rita Hayworth in Cover Girl (1944), where he created a memorable routine dancing to his own reflection. In his next film Anchors Aweigh (1945), MGM virtually gave him a free hand to devise a range of dance routines, including the celebrated and much imitated animated dances with Jerry Mouse, and his duets with co-star Frank Sinatra.Anchors Aweigh became one of the most successful films of 1945 and it garnered Kelly his first and only Academy Award nomination for Best Actor. In Ziegfeld Follies (1946) – which was produced in 1944 but not released until 1946 – Kelly collaborated with Fred Astaire – for whom he had the greatest admiration – in the famous "The Babbitt and the Bromide" challenge dance routine before leaving the studio for wartime service. Throughout this period Kelly was obliged to appear in straight acting roles in a series of cheap B-movies, now largely forgotten.