Holley was born in Urbana, Illinois, and graduated from Urbana High School in 1938. He went on to study chemistry at the University of Illinois at Urbana-Champaign, graduating in 1942 and commencing his PhD studies in organic chemistry at Cornell University. During World War II Holley spent two years working under Professor Vincent du Vigneaud at Cornell University Medical College, where he was involved in the first chemical synthesis of penicillin. Holley completed his PhD studies in 1947.