John Donnelly was born probably in 1821 or 1822 in England. His parents' names are unknown, and the details of his early life are obscure. He first came to New Zealand about 1844, and was employed as a whaler. At this time his exact whereabouts were unknown. In 1851, following gold discoveries in Australia, Donnelly prospected for gold on the Gippsland field. His success as a prospector apparently began then, for a creek there bears his name. He later returned to England, and probably in 1856 or 1857 married Mary Ann Platton.
By late 1864 Donnelly, back in New Zealand since 1859, was trying his luck as a prospector on the West Coast of the South Island. On 1 October 1864, along with Jimmy Liddle and some Maori, he crossed the Hokitika River and headed south along the beach looking for a suitable river to prospect for gold. For several weeks the party successfully prospected the Totara River and its main branch, later to be called Donnellys Creek. On returning to Hokitika with gold, the men were careful not to attract attention. However, news of their success soon had miners heading south for the new goldfield at the Totara. These diggings, which had shown such promise to Liddle, Donnelly and party, never quite proved worthwhile, but the discovery led to the opening of the large Ross goldfield. By August 1865 the diggers had gradually moved south to work Donnellys Creek, and in rapid succession the rich creek leads from there south to Donoghues were prospected, and the rush was on.
Like many prospectors, Donnelly appears to have been interested only in the actual gold discovery, not in working a claim. During November 1864 he left the Totara and headed north from Hokitika. He began prospecting Shamrock Creek, situated between the Arahura and Taramakau rivers. His party again struck gold and before long 100 miners were at work in the Callaghans area. From here diggers worked their way south into the Waimea Creek and started mining its three branches, and the Waimea rush began. A town hurriedly built in the river fork was known variously as Eight Mile, Forkstown, Waimea, and later Goldsborough.
Little is known of Donnelly's life following his Waimea discovery. It is most probable the lure of the Kumara goldfield drew him, for he later worked as a bushworker for a sawmill there. In 1894 the Kumara Miners Association petitioned the government on his behalf for a reward for his gold discoveries some 30 years earlier. This request was refused and a statement issued that no rewards could be considered more than five years after the initial discovery. Yet on 26 August 1896 the Kumara Times reported that Donnelly had been awarded £25 for the discoveries.
On 3 June 1904, after some months of illness in the Kumara Hospital, Donnelly walked out of the institution to commit suicide by drowning in a nearby gravel pit.