After her film career declined in the mid-1940s, Kelly returned to New York where she worked in radio and summer stock. She also became a lifelong friend, personal assistant, and frequent lover of Tallulah Bankhead. Kelly returned to the screen after 17 years with guest spots on television and in film roles.
In 1971, Kelly returned to the stage in the revival of No, No, Nanette for which she won a Tony Award. She continued appearing in film and television roles until she suffered a stroke in January 1980 which limited her ability to speak. Kelly died of cancer in 1981.
Kelly was born Sarah Veronica Rose Kelly in Brooklyn to Irish immigrants parents John (died 1942) and Delia Kelly (1875-1930). She began her career in vaudeville as a dancer at the age of 12. While in vaudeville, she performed in Frank Fay's act, first in a song-and-dance routine and later as Fay's comic foil. In one routine, Kelly told Fay and the audience that she had been at the beauty parlor. Fay remarked, "And they didn't wait on you?" She remained with Fay for several seasons until Fay eventually dismissed her.
Kelly, like other New York actors, made her screen debut in a Vitaphone short subject filmed there. In 1933 producer Hal Roach hired Kelly to co-star with Thelma Todd in a series of short-subject comedies. (Kelly replaced ZaSu Pitts, who left Roach after a salary dispute.) The Todd-Kelly shorts cemented Patsy Kelly's image: a brash, wisecracking woman who frequently punctured the pomposity of other characters. Later entries in the series showcased Kelly's dancing skills. Kelly made 35 shorts with Todd before Todd died in 1935. Lyda Roberti replaced Todd, but died of heart failure in 1938.