The Selkirk First Nation (Hucha Hudan people) name for the river is Ts'enkínyäk Chú, meaning 'water running between the mountains'.

The river was later named by Robert Campbell in honour of Sir John Henry Pelly, governor of the Hudson's Bay Company.

The restored Hudson's Bay Company trading post of Fort Selkirk is at the juncture of the Pelly and Yukon Rivers.

The Pelly rises in glaciers on the western slopes of the Selwyn Mountains above 1,400 m (4,600 ft) in elevation, close to the Yukon-Northwest Territories boundary.

Paralleling the Robert Campbell Highway, it then merges with the Lapie River from the left and passes the community of Faro which can be reached by a bridge.