Kelly, who is making her debut in the event, scored a convincing 7&6 (seven-up with six holes remaining) victory over the unfit six-time LPGA Tour winner at the Shadow Creek Golf Course in Las Vegas, Nevada.
The Malaysian won six consecutive holes from five to 10, building a 7-up lead over the American Solheim Cup star, who has been battling a back injury for the last month.
Kelly said she kept herself focused on winning but felt bad about Danielle's injury predicament.
"I thought I played really well today (Wednesday). I gave myself a lot of chances. Yeah, I played against Danielle, and it looked like she was in a little bit of pain, which, I felt a little bad," Kelly told lpga.com
"I was just trying to focus on my game. The goal was to win it. I am super proud of the way I played."
The crucial win against the fourth-seeded Danielle hands 61st seed Kelly a massive boost as only the winners of the 16 groups will advance to the knockout stage.
The other two players in Group Four are 29th seed Pajaree Anannarukarn of Thailand and 36th seed Ji Eun Hee of South Korea.