Lee was born in Rye, a small town just outside New York City. He originally studied physics at Harvard, graduating in 1952. After a period spent in the army, he joined the university of Connecticut in 1954, and in 1955 enrolled at Yale to work for a PhD in the low-temperature research group.

Superfluidity in the helium isotope, helium-4, had first been detected by Pyotr Kapitza in 1938 at a temperature of about two degrees above absolute zero (2.17 K). Helium-4 has a nucleus containing two protons and two neutrons and has two orbiting electrons. This means that it has an integral spin and belongs to the class of particles known as bosons. It was recognized that helium-3, with a nucleus consisting of one neutron and two protons, would have a spin of +½ and therefore must be a fermion. As only bosons could occupy the same quantum state, only bosons, it was thought, could ever become superfluids. However, theoretical considerations proposed by John Bardeen and his colleagues suggested that under certain conditions fermions could behave like bosons and that helium-3 could possibly display superfluidity.

In 1971, Lee's graduate student Douglas Osheroff stumbled on precisely the conditions that would lead to superfluidity. Further work by Lee and his colleagues established that there are three distinct superfluid phases of helium-3 at 0.0027 K, 0.0021 K and 0.0018 K.

For this work, Lee was awarded the 1996 Nobel prize for physics with Douglas Osheroff and Robert Richardson.