The 29-year-old wowed in the baby-blue number, with a bejewelled halter neck top and a frilly skirt.
The seriously low-cut gown, with its plunging neckline, meant Kelly had to forget wearing a bra for the big night.
The Star Wars actress completed the Cinderella-inspired look with silver earrings and minimal make-up to ensure she did not distract from her incredible frock.
Getty ImagesBUSTY: Kelly looked phenomenal in her gown
Getty ImagesSTUNNING: Kelly channelled major Cinderella vibes in the blue number
By choosing to wear a blue dress, Kelly shunned the Time's Up dress code which saw actresses wear black as a symbol of their solidarity against sexual abuse, pay inequality and discrimination.
Speaking to Glamour magazine, Time's Up activists Shonda Rhimes, Laura Dern have stated this year's Oscars will not see the red carpet as the avenue of protest, unlike the Golden Globes which saw many stars wear black.
Kelly, who played Rose Tico in reboot, Star Wars: The Last Jedi, was joined by Blanca Blanco who also wowed in a sensational red and white dress, complete with thigh high split.
GettyLAUGHING: Kelly flaunted her ample assets
Getty ImagesTHIGH HIGH: Blanca rocked a raunchy gown
This year's Oscars, which celebrates its 90th birthday, will see the Hollywood A-list go head-to-head to win a coveted trophy.
Dunkirk, which starred One Direction star Harry Styles, is up for the Best Picture gong, which is hotly contested by Call Me By Your Name, Darkest Hour, Get Out and Lady Bird, among others.
It's set to be an unpredictable night at the film awards, which last year caused a stir after La La Land was announced as Best Film in an envelop mix-up, when Moonlight was supposed to win.
WENNWINNER?: Could Margot win Best Actress?
Timothée Chalamet, Daniel Day-Lewis, Daniel Kaluuya, Gary Oldman and Denzel Washington are all up for Best Actor, while Sally Hawkins, Frances McDormand, Margot Robbie, Saoirse Ronan and Meryl Streep are vying for Best Actress.
Australian stunner Margot has received major critical acclaim for her role in documentary, I, Tonya.
The 27-year-old, who launched her career in Australian soap Neighbours, has been wished good luck by her former co-stars.
Alan Fletcher, who plays Karl Kennedy, said in a touching video: "Darling Margot, all the love to you from everyone at Neighbours."
And tonight's Oscar 2018 winners are:
Supporting Actor: Sam Rockell – Three Billboards Outside Ebbing, Missouri
Costume Design: Phantom Thread
Make up and Hairstyling: Darkest Hour
Documentary Feature: Icarus
Sound Editing: Dunkirk
Sound Mixing: Dunkirk
Best Production Design: The Shape of Water
Best Foreign Language Film: A Fantastic Woman
Best Supporting Actress: Allison Janney, I, Tonya.
Best Animated Short: Dear Basketball
Best Animated Feature: Coco
Best Visual Effects: Blade Runner: 2049
Best Film Editing: Dunkirk
Best Documentary Short Subject: Heaven is a Traffic am on the 405
Best Live Action Short Film: The Silent Child
Getty ImagesWINNERS: A selection of winners who scooped a gong tonight
Best Adapted Screenplay: James Ivory – Call Me by Your Name
Best Original Screenplay: Jordan Peele – Get Out
Best Cinematography: Roger A Deakins – Blade Runner 2049
Best Original Score: Alexandra Desplat – The Shape of Water
Best Original Song: Remember Me – Coco
Best Director: Guillermo del Toro – The Shape of Water
Best Actor: Gary Oldman – Darkest Hour
Best Actress: Frances McDormand – Three Billboards Outside Ebbing, Missouri
Best Picture: The Shape of Water