Born in 1917 in Hunan province, China, Lee belonged to a family of distinguished scholars. He earned a bachelor of arts degree from Xi'nan University, then, in 1943, emigrated to the United States, where he earned an MFA in playwriting from Yale University in 1947. He was a contributor to Radio Free Asia. Lee was a journalist working for two Chinatown, San Francisco, California newspapers, Chinese World and Young China when he penned his landmark tale of generational and cross-cultural conflict in the early 1950s. He lived in San Francisco's Chinatown to turn his short story into a novel. It was he who suggested going to Forbidden City to watch Asians sing and dance, resulting in Jack Soo quitting his job as the nightclub's emcee to perform in the Broadway production.

Lee's bestselling 1957 novel The Flower Drum Song was adapted as a Rodgers and Hammerstein musical of the same name that opened in 1958. The original production was the first Broadway show to feature Asian American players. The 1961 film jump-started the careers of the first generation of Asian American actors, including Nancy Kwan, James Shigeta, and Jack Soo. On October 2, 2001, the Mark Taper Forum in Los Angeles premiered David Henry Hwang's adaptation of Rodgers and Hammerstein's Flower Drum Song to glowing reviews, in the first production that literally was an all-Asian cast of actors and voices. Its initial run was extended, and after several months, the production moved to Broadway.

Some observers felt that Lee's novel perpetuated Orientalist stereotypes of Asians. The novel was a New York Times bestseller, but quickly went out of print. The first ethnic studies programs in the late 1960s did not accept Lee's playful vision of mixing Chinese and American traditions. For many years the book was rejected by young Asian Americans as being "too white face" or "Uncle Tom". Lee was a Chinese immigrant and wrote of the society as he saw it at that time, perhaps an example of the very generation gap portrayed in the musical. While mainstream America had fueled Lee's initial success, the new Asian American movement's consciousness-raising had all but buried Lee's evocation of the Chinese experience in America. Largely in conjunction with the 2002 Broadway revival of the musical, the novel was made available again as a reprint.

Lee, still living, was interviewed on the 2006 DVD release of the movie, and worked with Hwang in the rewriting of the musical. He makes his home in Alhambra, California.

A new musical with music written by Larissa Lam based on his book "Days of the Tong Wars" is in development. directed by Mike Hagiwara.