Born and brought up in Chessington, her father was in the police and her mother was a part-time secretary at Kingston Hospital and she attended Tolworth Girls' School where she became interested in drama - though she never did go to drama school.

Inspired to seek acting work beyond school, she wrote to the producers of the television drama Prime Suspect and six months later was granted and won the audition, for a role in an episode of Prime Suspect (Prime Suspect 4: Inner Circle), which aired on ITV on May 7, 1995, she was then seventeen. Six years later, on the cast of Last Orders with Helen Mirren where they met once more, Mirren said,"Oh I knew I'd see you again."

Her first professional role was followed by a series of parts on the English stage. She worked with Terry Johnson in four productions, Elton John’s Glasses (1997), The London Cuckolds (1998), The Graduate (2000) and Piano/Forte (2001). Johnson wrote Piano/Forte for her and said "Kelly is possibly the most natural, dyed-in-the-wool, deep-in-the-bone actress I've ever worked with. She is utterly instinctive, and she seems to know absolutely what it is to be human." Patrick Marber, her director in After Miss Julie (2004) said, "Not only is she utterly instinctual but she is also totally honest. She inhabits a part without any mannerism at all, to the extent that you don't even notice her act." Despite this enthusiasm, Reilly herself has stated that she learned the most as an actor from Karel Reisz who directed her in The Yalta Game in Dublin (2001). She said, "He was my masterclass. There is no way I would have been able to do Miss Julie if I hadn't done that play."

In her work, Reilly has been equally at home in television, film and stage productions. By 2000, Reilly felt she was being typecast in comedy roles and she actively sought out a role as the young Amy in Last Orders, directed by Fred Schepisi. This was followed by an edgy role in the stage play Blasted (2001). The Times of London called her "theatrical Viagra" for her willingness to appear nude in such roles. She told a reviewer that after her mother saw her in Blasted she asked, "Why can't you just do something where you wear a nice dress and be nice?" In 2002, she starred alongside Audrey Tautou and Romain Duris as Wendy, an English Erasmus student, in the French comedy L'Auberge espagnole ("The Spanish Apartment"). She resumed her role in the 2005 sequel, Les Poupées Russes ("The Russian Dolls"). Also in 2005, she had a series of small but notable roles in such films as Mrs. Henderson Presents and Pride & Prejudice.

Her first lead role came in 2008 in the horror film Eden Lake and, in 2009, she had a high-profile role on prime time British television in the three-part police drama Above Suspicion. That year she was also in three major films, Sherlock Holmes starring Robert Downey Jr., Triage starring Colin Farrell and Me and Orson Welles.

Reilly's performance in After Miss Julie at the Donmar Warehouse made her a star of the London stage and earned her a nomination for a Laurence Olivier Theatre Award for Best Actress of 2003. Aged 26, she's the youngest person ever nominated for that award. And, in 2005, she won Best Newcomer Award at the Cannes Film Festival for her role as Wendy in The Russian Dolls (Les Poupées Russes).

In 2008, she announced that she had been engaged to Israeli actor Jonah Lotan. Reilly travels when she is not working and values her anonymity, which she said in 2008 she had been able to maintain despite nearly fifteen years in show business. Her brother Neil is a professional golfer.