Origin and history of dolly

1550s, Doll, an endearing name for a female pet or a mistress, from the familiar form of the fem. proper name Dorothy (q.v.). The -l- for -r- substitution in nicknames is common in English: compare Hal for Harold, Moll for Mary, Sally for Sarah, etc. 

From 1610s in old slang in a general sense of "sweetheart, mistress, paramour;" by 1640s it had degenerated to "slattern." Sense of "a child's toy baby" is by 1700. Transferred back to living beings by 1778 in the sense of "pretty, silly woman." By mid-20c. it had come full circle and was used again in slang as an endearing or patronizing name for a young woman.