Kennedy was born in Inverness, the son of Mary and Ian. He was brought up as a Roman Catholic, and was educated at Lochaber High School in Fort William. He went on to study for a Master of Arts degree in Politics and Philosophy at the University of Glasgow. At university he became politically active, joining the SDP, as well as the Dialectic Society.

On 6 January 2006 Kennedy was informed that ITN would be reporting that he had received treatment for a drinking problem. He decided to pre-empt the broadcast, called a sudden news conference, and made a personal statement that over the past eighteen months he had been coming to terms with a drinking problem, but had sought professional help. He told reporters that recent questions among his colleagues about his suitability as leader were partly as a result of the drinking problem but stated that he had been dry for the past two months and would be calling a leadership contest, in which he would stand, to resolve the issues surrounding his authority once and for all. It was later claimed that the source for ITN's story was his former press secretary turned ITV News correspondent, Daisy McAndrew.  The admission of a drinking problem seriously damaged his standing and 25 MPs signed a statement urging him to resign immediately. It was later claimed in a biography of Kennedy by the journalist Greg Hurst that senior Liberal Democrats had known about Kennedy's drinking problem when he was elected as leader in 1999 and had subsequently kept it hidden from the public.  On 7 January 2006, Kennedy called another press conference, at which he announced that while he was buoyed by the supportive messages he had received from grass root members, he felt that he could not continue as leader because of the lack of confidence from the Parliamentary party. He said he would not be a candidate in the leadership election and was standing down as leader "with immediate effect", with Menzies Campbell to act as interim leader until a new leader was elected.  He also confirmed in his resignation statement that he did not expect to remain on the Liberal Democrat Frontbench Team. He pledged his loyalty to a new leader as a backbencher, and said he wished to remain active in the party and in politics. Campbell went on to win the resulting leadership election, and Kennedy subsequently gave his successor full public support. His leadership had lasted slightly less than six years and five months.

Did he continue to stay in politics?
Campbell went on to win the resulting leadership election, and Kennedy subsequently gave his successor full public support.