Donnelly is O'Donnghaile in Irish, from Donnghaile. The prefix "O" denotes one who is the ancestor of Donnghaile. The word Donnghaile translates to "Brown Valor" or "Brown-haired Warrior." This name was given to someone who was dark and brave.
The Donnellys originally were a division of the clan Cineál Eoghain who derive their descent from Donnghal the fourth in descent from Domhnall, King of Aileach -- brother of Niall Glundubn and ancestor of the O'Neills, the chief family of ancient Ireland.
An original ancestor was Donnghaile O'Neill, who died in 876, was himself a descendant of Eoghain and ancestor of the royal house O'Neill. Donnghaile O'Neill was seventeenth in descent from Niall of the Nine Hostages, the fifth-century king who supposedly kidnapped St. Patrick to Ireland.
Their territory lay first in Co. Donegal and later further eastwards, centered around the place called Ballydonnelly, Co. Tyrone, which is west of Dungannon. Ballydonnelly was named from them. Ballydonnelly was recaptured later on and the settlement was renamed to Castlecaulfield, which it goes by to this day. This area is still the part of Ireland in which they are most numerous.
Many of the family were hereditary bards, but their main historical fame is as soldiers, especially in the wars of the seventeenth century.
Donnellys were hereditary marshals of the O’Neill military forces. One of the most famous was Donnell O’Donnelly who was “captain of one hundred men,” fought bravely until he and all his men were slain at the battle of Kinsale (1603). In 1641 Patrick O’Donnelly took the castle of Lord Caulfield near Dungannon and renamed it to Ballydonnelly. It was recaptured later on (as stated above) and the settlement was renamed to Castlecaulfield, which it goes by to this day.
In modern times Donnellys are connected with the U.S.A. rather than Ireland the country of their origin. Examples of modern day Donnellys are Charles Francis Donnelly (1836-1909), the Catholic lawyer; Ignatius Donnelly (1831-1901), politician and reformer; and Sister Eleanor Cecilia Donnelly (1838-1917), author of many Catholic devotional works.
-Irish Familes, by Edward MacLysaght circa 1957
-Donnelly Surname History, by Willie O'Kane
-Irish Roots Magazine, Surnames of County Tyrone, in Issue 4, 1993