The former Council of Trade Union president died earlier this month at 52. She was regarded as a relentless pioneer for workers' rights.
This year, after she was daignosed with lung cancer in February, she shifted her focus and brought the issue of medicinal cannabis into the public arena.
Kelly received 108 of the 375 nominations for New Zealander of the Year but the terms and conditions of the Award say it can't be given posthumously.
Kelly died from lung cancer on October 14, two weeks after nominations closed on September 30.
Awards manager Gyn Taylor said the rules stated the award could not be given post-humously.
"The intent is to ensure we are celebration those who have made a contribution and are still around to be acknowledged," Taylor said.
"I understand people will be upset but her not being eligible is not a reflection on her contribution."
The awards have been running for eight years and it is understood this was the first year when a death had occured during the nomination process.
Taylor said Kelly would still be acknowledged at the ceremony.
Kelly's family would receive a "Local Hero Award" medal in Wellington in December, as judging for that had already happened before she died.
Mr Taylor said Kelly would also be honoured at the dinner for the main award in February.
Kelly had campiagned relentlessly for workers rights in particular for the workers killed in the Pike River mining tragedy.
Kelly's popularity was evident on Friday when more than 1500 people gathered at the Michael Fowler Centre in Wellington for her memorial ceremony.
