In 1973, Lee emigrated to the United States and attended high school in Oak Ridge, Tennessee. He graduated summa cum laude from Columbia University, earning a B.S. degree in computer science in 1983. He went on to earn a Ph.D. in computer science from Carnegie Mellon University in 1988.

At Carnegie Mellon, Lee worked on topics in machine learning and pattern recognition. In 1986, he and Sanjoy Mahajan developed Bill, a Bayesian learning-based system for playing the board game Othello that won the US national tournament of computer players in 1989. In 1988, he completed his doctoral dissertation on Sphinx, the first large-vocabulary, speaker-independent, continuous speech recognition system.

Lee has written two books on speech recognition and more than 60 papers in computer science. His doctoral dissertation was published in 1988 as a Kluwer monograph, Automatic Speech Recognition: The Development of the Sphinx Recognition System ( ISBN 0898382963). Together with Alex Waibel, another Carnegie Mellon researcher, Lee edited Readings in Speech Recognition (1990, ISBN 1-55860-124-4).

After two years as a faculty member at Carnegie Mellon, Lee joined Apple Computer in 1990 as a principal research scientist. While at Apple (1990–1996), he headed R&D groups responsible for Apple Bandai Pippin, PlainTalk, Casper (speech interface), GalaTea (text to speech system) for Mac Computers.

Lee moved to Silicon Graphics in 1996 and spent a year as the Vice President of its Web Products division, and another year as president of its multimedia software division, Cosmo Software.

In 1998, Lee moved to Microsoft and went to Beijing, China where he played a key role in establishing the Microsoft Research (MSR) division there. MSR China later became known as Microsoft Research Asia, regarded as one of the best computer science research labs in the world. Lee returned to the United States in 2000 and was promoted to corporate vice president of interactive services division at Microsoft from 2000 to 2005.

In July 2005, Lee left Microsoft to take a position at Google. The search company agreed to compensation worth in excess of $10 million, including a $2.5 million cash ‘signing bonus’ and another $1.5 million cash payment after one year, a package referred to internally at Google as ‘unprecedented’.

On July 19, 2005, Microsoft sued Google and Lee in a Washington state court over Google’s hiring of its former Vice President of Interactive Services, claiming that Lee was violating his non-compete agreement by working for Google within one year of leaving the Redmond-based software corporation. Microsoft argued that Lee would inevitably disclose proprietary information to Google if he was allowed to work there.

On July 28, 2005, Washington state Superior Court Judge Steven González granted Microsoft a temporary restraining order, which prohibited Lee from working on Google projects that compete with Microsoft pending a trial scheduled for January 9, 2006. On September 13, following a hearing, Judge González issued a ruling permitting Lee to work for Google, but barring him from starting work on some technical projects until the case went to trial in January 2006. Lee was still allowed to recruit employees for Google in China and to talk to government officials about licensing, but was prohibited from working on technologies such as search or speech recognition. Lee was also prohibited from setting budgets, salaries, and research directions for Google in China until the case was to go to trial in January 2006.

Before the case could go to trial, on December 22, 2005 Google and Microsoft announced that they had reached a settlement whose terms are confidential, ending a five-month dispute between the two companies.

On September 4, 2009, Lee announced his resignation from Google. He said “With a very strong leadership team in place, it seemed a very good moment for me to move to the next chapter in my career.” Alan Eustace, senior Google vice-president for engineering, credited him with “helping dramatically to improve the quality and range of services that we offer in China, and ensuring that we continue to innovate on the Web for the benefit of users and advertisers”. Several months after Lee’s departure, Google announced that it would stop censorship and move its mainland China servers to Hong Kong.

On September 7, 2009 he announced details of a $115m venture capital (early-stage incubation and seed money business model) fund called “Innovation Works” (later changed to “Sinovation Ventures”) that aims to create five successful Chinese start-ups a year in internet and mobile internet businesses or in vast hosting services known as cloud computing. The Innovation Works fund has attracted several investors, including Steve Chen, co-founder of YouTube; Foxconn, the electronics contract manufacturer; Legend Holdings, the parent of PC maker Lenovo; and WI Harper Group.

In September 2010, Lee described two Google Android projects for Chinese users: Tapas, a smart-phone operating system tailored for Chinese users and Wandoujia (SnapPea), a desktop phone manager for Android.

Lee was born in Taipei, Taiwan. He is the son of Li Tianmin, a legislator and historian from Sichuan, China. Lee has detailed his personal life and career history in his autobiography in both Chinese and English, Making a World of Difference, published in October 2011.

In December 2012, Innovation Works announced that it had closed a second US$275 million fund.

Lee was barred from Weibo for three days after he used Weibo to complain about China’s Internet controls. A February 16, 2013, post summarized a Wall Street Journal article about how slow speeds and instability deter overseas businesses from locating critical functions in China. In January 2013, he also posted support for staff of a Guangzhou-based newspaper during a standoff with government censors.

Lee posted on Weibo on 5 September 2013 that he had been diagnosed with lymphoma. In December 2018, Lee spoke at the End Well Symposium on end of life in San Francisco stating, “I was a maniacal workaholic. That workaholism ended abruptly about five years ago, when I was diagnosed with Stage IV lymphoma.”

In September 2016, the company announced its corporate name change from Innovation Works to “Sinovation Ventures,” closing US$674 million (4.5 billion Chinese yuan) capital injection. Total fund size of Sinovation Ventures exceed US$1 billion. In April 2018, Sinovation Ventures announced its US dollar Fund IV of $500 million. To date, Sinovation Ventures’ total asset under management with its dual currency reaches US$2 billion and has invested over 300 portfolios primarily in China.