Kelly Johnson was born in the remote mining town of Ishpeming, Michigan. His parents were Swedish, from the city of Malmö, county of Scania. His father ran a construction company. Johnson was 13 years old when he won a prize for his first aircraft design. He worked his way through Flint Central High School and graduated in 1928, then went to Flint Junior College, now known as Mott Community College, and finally to the University of Michigan in Ann Arbor, where he received a Bachelor's and Master's Degree in Aeronautical Engineering.

Johnson led or contributed to the development of a number of aircraft. A few examples illustrate the influence of his work. In the late 1930s, Johnson helped lead the team that developed the P-38 Lightning. Eventually, almost 10,000 of these fighters were built. They played a significant role in World War II. In 1943, responding to United States Army Air Forces' concerns about Nazi Germany's development of high performance jet fighters, Johnson proposed to develop a jet airplane in six months. The result, the P-80 Shooting Star, was completed on time and became America's first operational jet fighter. The need to find space to develop the P-80 also led to the creation of the facility that would later be called the Skunk Works. Johnson also led the development of the SR-71 Blackbird family of aircraft. Through a number of significant innovations, Johnson's team was able to create an aircraft that flew so high and fast that it could neither be intercepted nor shot down. No other jet airplane has matched the Blackbird's performance.

At the University of Michigan, Johnson conducted wind tunnel tests of Lockheed's proposed Model 10 airliner. He found the aircraft did not have adequate directional stability, but his professor felt it did and told Lockheed so. Upon completing his master's degree in 1933, Johnson joined Lockheed as a tool designer on a salary of $83 a month. Shortly after starting, Johnson convinced Hall Hibbard, the chief Engineer, the Model 10 was unstable. Hibbard sent Johnson back to Michigan to conduct more tests. Johnson eventually made multiple changes to the wind tunnel model, including adding an "H" tail, to address the Problem. Lockheed accepted Johnson's suggestions and the Model 10 went on to be a success. This brought Johnson to the attention of company management, and he was promoted to aeronautical Engineer.

In 1937, Johnson married Althea Louise Young, who worked in Lockheed's accounting department; she died in December 1969.

While at Lockheed, Johnson designed the P-38 Lightning fighter, made Fowler flaps work on the Model 14 Super Electra, and played a major role in converting the type into the Royal Air Force's Lockheed Hudson on short notice in 1938. He worked on the development of the Constellation for Howard Hughes' TWA airline.

In 1955, at the request of the Central Intelligence Agency, Johnson initiated construction of the airbase at Groom Lake, Nevada, later known as Area 51. This project provided a secret location for FLIGHT testing the Lockheed U-2.

Johnson became Vice President of Advanced Development Projects (ADP) in 1958. The first ADP offices were nearly uninhabitable; the stench from a nearby plastic factory was so vile that Irv Culver, one of the Engineers, began answering the intra-Lockheed "house" phone "Skonk Works!" In Al Capp's comic strip Li'l Abner, Big Barnsmell's Skonk Works — spelled with an "o" — was where Kickapoo Joy Juice was brewed. When the name leaked out, Lockheed ordered it changed to "Skunk Works" to avoid potential legal trouble over use of a copyrighted term. The term rapidly circulated throughout the aerospace community, and became a Common nickname for research and development offices; however, reference to "The Skunk Works" means the Lockheed ADP department. Here, the F-104 Starfighter and the secret reconnaissance planes U-2 and SR-71 Blackbird were developed.

He served on Lockheed's board of Directors from 1964 to 1980, becoming a senior vice President in 1969. He officially retired from Lockheed in 1975 and was succeeded by Ben Rich, but continued as a consultant at the Skunk Works. In June 1983, the Lockheed Rye Canyon Research and Development Center in Santa Clarita was renamed Kelly Johnson Research and Development Center, Lockheed-California Company, in honor of Johnson's 50 years of Service to the company.

He married Meade's friend Nancy Powers Horrigan in November 1980.

His autobiography, titled Kelly: More Than My Share of it All, was published in 1985.

Kelly had a 15th rule that he passed on by word of mouth. According to the book "Skunk Works" the 15th rule is: "Starve before doing Business with the damned Navy. They don't know what the hell they want and will drive you up a wall before they break either your heart or a more exposed part of your anatomy."