Kelly looked set to join League Two side Stockport County on a two-year contract in April 2006, but a day later he said he was yet to decide whether to join them. Having made 52 league appearances for Portadown he rejected a new contract at the club with the aim of returning to professional football. He eventually chose to return to his old club Derry City for the second time in May. He played in all of Derry's six matches in the 2006–07 UEFA Cup campaign, which included a goal in the 5–1 victory over Gretna. He was chosen as the Soccer Writer's Association of Ireland Player of the Month in September 2006. He was named in the Professional Footballer Association of Ireland's team of the year in December 2006. He featured for Derry in the first qualifying round of the UEFA Champions League in the 2007–08 season, playing in the 2–0 defeat to FC Pyunik. He made 29 league appearances in his second spell as a Derry player.