Kelly was born in Günzburg, Bavaria (then American Occupation Zone, Germany) in 1947, with the name Petra Karin Lehmann. She changed her name to Kelly after her mother married a US Army officer. She was educated in a Roman Catholic convent in Günzburg and later attended school in Georgia and Virginia after her family relocated to the United States in 1959. She lived and studied in the United States until her return to West Germany in 1970. She retained her (West) German citizenship throughout her life.

An admirer of Martin Luther King, Jr., she campaigned for Robert F. Kennedy and Hubert Humphrey in the 1968 U.S. elections. She studied political science at the School of International Service at American University (Washington, DC), from which she graduated in 1970. She graduated from the European Institute at the University of Amsterdam in 1971.

While working at the European Commission (Brussels, Belgium, 1971–83), she participated in numerous peace and environmental campaigns in Germany and other countries.

Petra Kelly was one of the founders of Die Grünen, the German Green Party in 1979. Between 1983 and 1990, she was a member of the Bundestag (German Parliament).

Kelly received the Right Livelihood Award (also known as the Alternative Nobel Prize) in 1982 "...for forging and implementing a new vision uniting ecological concerns with disarmament, social justice, and human rights."

Kelly wrote the book "Fighting for Hope" in 1984 published by South End Press. The book is an urgent call for a world free from violence between North and South, men and women, ourselves and our environment.

In 1992, she was shot dead in Bonn while sleeping, according to the police, by her partner, ex-general and Green politician Gert Bastian (born 1923), who then killed himself. Kelly's friends believe her death was totally unexpected and occurred without her consent. She was 44; he was 69. Her body was discovered on 19 October, and it was determined she had died on 1 October. Petra Kelly was buried in the Waldfriedhof in Würzburg, near the village of Heidingsfeld in Lower Franconia, Bavaria.

With the goal of furthering Petra Kelly's ideas and political message, the Petra Kelly Foundation was founded in 1997 as part of the Heinrich Böll Foundation. Since 1998, the foundation has presented the Petra Kelly Prize for Human Rights, Ecology, and Nonviolence. The city of Barcelona has established the Jardi Petra Kelly on Montjuïc.

In the words of her friend, the Dalai Lama: "Petra Kelly was a committed and dedicated person with compassionate concern for the oppressed, the weak, and the persecuted in our time. Her spirit and legacy of human solidarity and concern continue to inspire and encourage us all." Another of her close friends, philanthropist and Greatest Planet founder David Gilmour, wrote in the Frankfurter Allgemeine Zeitung: "EVERGREEN is the word that comes to mind when describing Petra Kelly. If not quite a daughter of the soil, she was a granddaughter of it, and her concern for our planet led her to become an environmentalist, indeed the first female environmentalist to achieve such resounding political success."