The village takes its name from the family of Kelloe or Kellaw: Richard Kellaw was Bishop of Durham in 1311. 

The Lordship of the Manor of Kelloe was bought by the Tempests of Broughton Hall, North Yorkshire, and bequeathed by Sir Henry Vane-Tempest to his daughter, Lady Frances Vane, who married the third Marquess of Londonderry. The current holder of the Lordship of Kelloe is Mr Barrington Edward Kerr Gilmour of Northumberland.

The village expanded with the mining industry: the population increased from 663 to more than 11,000 by 1848. 

Nearby is East Hetton or Kelloe colliery where six men were killed by gasses from the Trimdon Grange colliery disaster in 1882.

Durham Mining Museum - East Hetton Colliery (dmm.org.uk)