The plot of a new film out next year appears, at first glance, to belong in the long tradition of Hollywood prison movie tear-jerkers. A young man – charismatic but volatile, a local troublemaker – is charged with the brutal murder of his female neighbour. To his family's disbelief, he is convicted and sentenced to life in prison without parole. Protestations of innocence fall on deaf ears, all appeals fail, and he is condemned to live out his life in jail. In desperation, his sister – a pub waitress and high-school dropout – puts herself through law school, hoping to fight for his innocence herself. Against all odds, she unearths DNA evidence to clear his name and, after 18 years behind bars, her brother finally walks free.

Like The Shawshank Redemption or Green Mile, Conviction seeks to summon humanity from the despair of the US prison system. The difference, however, is that this story is completely true. Betty Anne Waters really is a part-time pub waitress, who really did put herself through law school and single-handedly proved her brother's innocence, along the way sacrificing her marriage and even, at one point, life with her two young sons. A decade on from her brother Kenny's release, Conviction brings her story to the big screen – a sort of Erin Brockovich of the courtroom – leaving out only a final twist so cruel that it was feared cinema audiences would be unable to bear it.

I meet Waters, 55, when she is flown in to London to publicise the film. Her faintly wary expression gives the unusual impression of someone simultaneously overwhelmed and unimpressed, and she has a hesitant, deadpan conversational style. Her appearance may be more groomed than one suspects it used to be, but there is nothing polished about the way she tells her story – haltingly, without rhetorical flourishes or dramatic pauses. "You keep thinking your life can't get any crazier," she says. "And then here we go."

Waters was born in 1955, one of nine children in the kind of family that, had they lived in America's deep south, would probably have been described as white trash. Instead, the children grew up in rural Massachusetts, in a small town called Ayer, where they were well known as "one of those families" – wild and ungovernable, the type to pinch apples from your trees, or maybe worse. Their fathers were varied and absent, while their mother was chaotic and neglectful, and Waters and her brother Kenny, older by one year, saw plenty of the police growing up. Sometimes they used to break into neighbours' houses and steal sweets: "We were little wild Indians, you could say." She smiles.

By the late 70s the family had moved to Rhode Island, where Waters dropped out of high school a year early and began working part-time in a restaurant with Kenny. But Kenny moved back to Ayer, to look after their grandfather, and while he was there, a neighbour was robbed and stabbed to death. The police called him in for questioning straight away, because of his criminal record – but he had an alibi: he had worked all night in a local diner, and gone straight to court in the morning, to face charges of assaulting a police officer. "For the first time ever I'm thinking, 'I'm happy Kenny was in court,' " Waters says. "What a perfect alibi. So Kenny was never a suspect."

Two and a half years later, out of the blue, the police arrested Kenny and charged him with the murder. The family considered hiring a private defence lawyer, but the down payment alone would have cost $50,000. "Kenny said, 'Please, don't do that, because it would just be a waste – all the evidence shows I'm innocent,' " and so they didn't. Wasn't Waters very worried? "No, we thought it was just ridiculous. We thought Kenny was coming home with us. But then, of course, the trial began. And it was a different story."

At the time of Kenny's arrest, Waters had checked with the diner in Ayer to make sure they still had the timecards that would prove his alibi. "I was worried, because it had been more than two years. But the girl in the office said, 'Yes, I just looked them out for the police, and they're on their way over now to pick them up.' " Yet when the trial opened, the court was told that no timecards for that week had ever been found. Waters began to panic.

"But by then it was too late. I knew that the police had had the timecards, but I couldn't take the stand and tell the jury, because I'd already been in the courthouse hearing evidence – and if you've heard evidence you can't then be a witness. It was crazy."

Things got much worse. An ex-girlfriend called Brenda Marsh, who had been living with Kenny at the time of the murder, testified that he'd come home drunk on the morning of the murder, covered in scratches. She said he'd not been to the diner to work, and nor did he go to the courthouse. According to Marsh – the mother of Kenny's only child – when the couple later broke up they had a drunken fight during which Kenny had confessed to the murder. Another ex-girlfriend, Roseanna Perry, then testified that he'd subsequently made a drunken confession to her as well. The jury found Kenny guilty, and in May 1983, at the age of 29, he was sentenced to life without parole.

Even then, Waters didn't lose hope. "Right after the conviction, Roseanna started calling my mother at two o'clock in the morning, drunk, saying, 'I'm so sorry.' And she wanted to recant." Waters found a lawyer, and Perry signed a 35-page affidavit admitting she had lied. Leave to appeal was granted, and once again Waters thought her brother would soon be coming home. "And then Roseanna flip-flopped again. She said she'd only signed the affidavit because the Waters made her sign it. She was afraid if she recanted she'd go to jail for perjury." The appeal failed.

"And that's when I got really nervous. Right up until that point, I really thought the system would work. I always thought only guilty people go to jail. Absolutely. That's why I was so shocked."

Left: The Waters kids in 1964 – Betty Anne, top right, and Kenny, bottom row, second left. Betty Anne with Kenny after his release in 2001 (right). Photograph: Courtesy Innocenceproject.org (2)

How could Waters be so sure her brother was innocent? "Well, first of all, I know my brother. He can't defuse a situation, so if someone's going to fight with him he's going to fight back – but he's not an aggressor. Provoke him and he doesn't know how to handle it – but he's not going to break into somebody's house and try to kill them. That's just not him. Plus, I knew the evidence. So I never doubted for a second that he was innocent. I always knew he was innocent."

But her brother was losing faith. In despair, Kenny tried to kill himself. The attempt failed, but he told her on the phone from prison, "Betty Anne, I can't live the rest of my life in prison. I just can't do it." Waters was beside herself, terrified that he would try again. Then he said to her, "Betty Anne, if you go back to school, and you become my attorney, I know you'll get me out of here. I don't care how long it takes." She promised she would, if he promised not to kill himself.

"And that was the deal we made. But I certainly did not think from the beginning, 'Oh yeah, I'll just do this, I'll just go along to law school and I'll take the bar and I'll find the evidence to somehow get him out,'" Waters laughs. "No, I did not for one second. I thought, let me enrol in school and keep him alive, and maybe something along the way will happen, but at least he won't kill himself." So in her early 30s, married with two young sons, the waitress enrolled at her local community college and began 13 years of long and lonely study.

Waters had only just completed her first degree when her husband left her, complaining that she loved her brother more than she loved him. A few years later, her two sons chose to go and live with their father, tipping Waters into serious depression. The film implies that the boys left because of their mother's dedication to her studies, but this is the only point she is keen to correct, saying sharply, "No, I didn't lose my sons. People say that, but they went to live with him for just over a year, and it was not because of Kenny, believe me. I had plenty of room in my life for my children, they were not feeling neglected. It was more my husband wanting them to go live with him. And I think it was because he was mad at me. But yes, it was very lonely, it was the worst time of my life." She pauses to smile. "I say that, but then I have had so many worst times. That was just a different kind of worst time."

Even when she finally got to law school, there was no Educating Rita-style intellectual awakening. On the contrary, "I'm thinking now, 'What happens if I don't find something? Where do we go from here?' It was terrible, anxious. The community college had been a less anxious time, because I was just keeping Kenny alive. But now what?"

By then she had stopped telling anyone about her brother in jail. "You see, when Kenny was first convicted I would tell people, 'My brother's in prison and he's innocent.' And I would get that look of, 'I feel so sorry for you, Betty Anne, because he's probably guilty.' I could see the look. And I knew it, because I would have thought the same thing. I understood it, because if you're in prison, you're guilty, right? Why would a jury convict you? Why would the system put you there? There's got to be something. So that's why I stopped telling people." Eventually she told just one person – a woman she met at law school, who soon became her best friend.

And then, quite suddenly, Waters made a breakthrough. At law school she studied a paper on DNA, and read about the Innocence Project, an organisation set up by the lawyer Barry Scheck to ask courts to reconsider cases using DNA evidence. At the time of Kenny's trial, DNA hadn't yet been understood. Waters realised that if she could track down the evidence samples from the case, and test them for DNA, her brother would be exonerated.

Left: Hilary Swank as Betty Anne sifts through evidence in the film Conviction, also starring Minnie Driver. Right: The ‘lost’ timecards that were Kenny’s alibi. Photograph: Courtesy Innocenceproject.org; Innocence Productions Inc

Pretending to be writing a research paper, Waters and her best friend began calling the clerk of courts in Boston. At first they were told that everything had been destroyed, but they kept pleading and pestering, and eventually persuaded a clerk to search the storeroom. A box was found containing evidence from the murder – a bloody scrap of curtain, and the knife – and Waters called the Innocence Project. Scheck agreed to act as co-counsel, and once again Waters thought her brother would soon be coming home.

But to Waters' dismay, Kenny refused to be tested for DNA. "He didn't understand DNA, it was still new, and he was afraid that they would plant evidence to show that he was guilty when he wasn't." Unless Kenny agreed to be tested, Waters and Scheck could do nothing. Did any bit of her wonder, for a second, if Kenny had other, darker reasons for refusing? "No," she says quietly, shooting me a sharp glance of surprise. "No, I did not."

Eventually, Waters persuaded him to trust the test. The DNA duly exonerated him, and in March 2001, with his sister by his side, Kenny stepped out of a Boston courtroom into freedom and a media scrum, the 83rd prisoner in the United States to be freed by DNA evidence.

Even then, though, Kenny wasn't fully free. His conviction for murder had been overturned, but the district attorney wanted to order a retrial, with Kenny charged this time as an accessory to the murder. So Waters, her best friend from law school and Scheck tracked down the two ex-girlfriends who had testified against him, determined to make them admit that they had lied.

Marsh's boyfriend, it transpired, had been the one who'd originally contacted the police, offering to sell her testimony against Kenny in return for money. "She always knew she lied," Waters says with a faint flash of anger. "She said she'd had to." What was it like, meeting this woman who had sent her brother to jail decades earlier? "Well," Waters smiles, "it was tense. This is a woman I despised. But I think I knew she was going to recant, because I think she'd always wanted to, but was afraid of perjury. But once Kenny was free, she knew the game was up. Now she had to tell the truth."

Perry recanted just as easily. When the police had approached her 17 years earlier, she'd at first insisted that Kenny had always told her he wasn't guilty. "But the police kept coming back, and they brought her to the police station – and she has a bit of a police record, too. And I think they promised her that would go away. They showed her these pictures of the murder scene, and said, 'This is what Kenny did.' And they told her, 'We already have all the proof we need. All we need is for you to tell the truth, and we know you know something.' And she'd kept saying, 'No, I don't' until finally, after seeing the pictures, she said, 'Oh, all right.' " Perry told Waters she hadn't realised it would be her testimony that would secure Kenny's conviction, and signed an affidavit admitting it was a lie.

At long last, after 18 years, Kenny was a free man. He was living with his sister, and the pair appeared on several chatshows, even Oprah, telling the world their story. "Oh my God, he had so much fun. So much fun," she says. In the months following his release she was bombarded with approaches from film companies: "And Kenny was so excited about it. He kept saying, 'Betty Anne, they want to make a movie about you!' "

But still Waters wasn't satisfied. "The DNA evidence exonerated Kenny, but it didn't prove what the Ayer police did to Kenny, on purpose. And that's what I wanted to prove."

Following his conviction, Waters had seen police reports referring to fingerprint evidence that had eliminated another suspect from their inquiry. Yet fingerprint evidence had never been used in court; the police had insisted no usable prints had been found at the murder scene. "And I'm, like, 'Well, where are those fingerprints?' Because if the evidence is good enough that it can eliminate one person, then it has to be good enough to eliminate everyone."

It took her another seven years to track down the evidence that would prove the police had deliberately and knowingly sent the wrong man to prison. "What happened was, the state police officer who lifted the prints at the scene retired a week before Kenny's arrest. And then he took the fingerprint package home with him. And just a couple of years ago, during the depositions, we found out that he had them in a storage unit, because he'd moved to Florida. He put everything there, so we said, 'We're going to want to see that.' And then he changed his mind, and said, 'Oh, I don't think they're there.' So we had a subpoena. And unloaded everything from his unit, and at the very end, of course, in 110-degree heat, we found the manila envelope with all the fingerprints in it, and a list that had my brother's name on it, eliminating him from the inquiry. They'd tested his prints twice. They knew he wasn't guilty. They knew from day one that Kenny was innocent."

Last year the town of Ayer agreed to settle a lawsuit for $3.4m in damages for his wrongful conviction. Next month, Conviction goes on general release, starring Hilary Swank as Waters and immortalising her story. It should have been the fairytale ending to a nightmare – and, as Waters says with a wistful smile, "Kenny would have loved what we're doing here now. He would have loved this."

In all the time he had been in prison, her brother had been a vivid presence in her family's life. "When you were on the phone with him you wouldn't think he was in prison, it was like he could just be in the room next door." For 18 years Waters had kept him alive by pursuing a dream only her brother truly believed in.

But just six months after his release in 2001, Kenny was having dinner with his mother and his brother when he decided to nip home to see if his nephews and nieces wanted them to bring some food home. He took a short cut over a fence, tripped, and fell 15 feet on to concrete. Thirteen days later, with Waters by his side in hospital, he died.

Waters has never practised as a lawyer again. She is approached all the time, she says, by clients asking her to represent them, but she always says no. She does some voluntary work for the Innocence Project, which has now helped to free 285 prisoners, but has no interest in being a lawyer. She still works in a Rhode Island pub, and while other family members were cast as extras in Conviction, she had no interest in appearing in the film, either.

"I'm just happy," she says quietly, "with what I'm doing."

• Conviction is out on 14 January 2011.