Mike Kelley was born on October 27, 1954, in Wayne, Michigan, a working-class suburb of Detroit. He attended the University of Michigan in Ann Arbor, where he co-founded the band Destroy All Monsters, which employed nonmusical instruments like vacuum cleaners and squeeze toys. After graduating in 1976 with a B.F.A., Kelley moved to Los Angeles to attend the California Institute of the Arts in Valencia, where he studied with Douglas Huebler and became friends with Tony Oursler. Kelley did his first public performances that year in Los Angeles, using many of the sculptural works he was making at school as props. In 1978, he gave up painting. His graduate thesis show comprised a series of plywood birdhouses.

Among the performances Kelley presented during this time were My Space at La Jolla Museum of Contemporary Art in 1978 and The Poltergeist (with David Askevold) at the Foundation for Art Resources in Los Angeles the next year. Building his reputation as a provocateur, many of these pieces ridiculed American culture and were intended to make the viewer uncomfortable. By 1980, he was putting together longer performances, which maintained his interest in the juvenile, the discomfiting, the scatological, and the psychosexual.

From his graduate-school days to the mid-1980s, Kelley developed interrelated visual art and Performance [more] works. In 1982, he made his first work in video, The Banana Man, which featured a character indirectly derived from the children's television show Captain Kangaroo. In 1984, he and two others performed two hours of an eight-hour piece, The Sublime, at the Museum of Contemporary Art in Los Angeles. In it, Kelley combined a sadomasochistic theme with the philosophical concept of the sublime. Kelley's performance Plato's Cave, Rothko's Chapel, Lincoln's Profile (1985) mocked the belief that the mental can be used to sublimate our physicality. The 1986 Massachusetts Institute of Technology presentation of this work included a live performance by the band Sonic Youth. Kelley subsequently decided to cease performing live and began making objects independent of performances. In the late 1980s, he began creating stuffed-animal works from humble, well-worn toys and handmade afghans, which he purchased at thrift shops. He made his Garbage Drawings, based on the Sad Sack comics, in 1988. Well received in Los Angeles, Kelley's art did not meet with success in New York until a 1988 exhibition at Metro Pictures. In 1993, the artist curated The Uncanny, an exhibition of unusual interpretations of the body, for Sonsbeek '93 at the Gemeentemuseum Arnhem in the Netherlands.

Kelley has collaborated with various artists, particularly in video, including Oursler and Paul McCarthy. In 1997–98, Kelley and Oursler presented the Poetics Project at Documenta, as well as at venues in Los Angeles, New York, and Tokyo; through video projections, sound, and artworks, this installation re-created their experience at CalArts as members of a short-lived band.

Kelley has had numerous solo shows, including two traveling midcareer retrospectives, organized by the Whitney Museum of American in New York (1993–94) and the Museu d'Art Contemporani de Barcelona (1997). Among the many group exhibitions he has participated in are the Whitney Biennial (1985, 1987, 1989, 1991, 1993, and 1995), Venice Biennale (1988 and 1995), Carnegie International (1991), and Documenta (1992 and 1997). Many of Kelley's writings—including art criticism, cultural commentary, and monologues from his performances—were recently published by the MIT Press. He continues to live and work in Los Angeles.