Kelly tied Smith for the lead with a birdie on the par-4 16th and moved ahead with a 15-foot birdie putt on the par-3 17th. After Smith left an 8-foot birdie try short on the par-5 18th, Kelly pulled his 3 1/2-foot birdie attempt to the left and tapped in for the winning par.
Kelly had a tournament-record 19-under 197 total at TPC Snoqualmie Ridge. He opened with a 65 for a share of the lead and had a 66 on Saturday to take a three-stroke advantage into the final round. The three-time PGA Tour winner from Madison, Wisconsin, was making his 13th senior start after turning 50 in November.
Smith closed with a 64.
Colin Montgomerie (66) was fifth at 15 under.
Local favorite Fred Couples tied for 20th at 8 under after a 70.