Lee was born in wartime Japan and was the fifth of seven children. In 1946 his family returned to Korea, but their boat capsized during the journey, and they landed ashore with little more than the clothes they were wearing. They settled in his father's hometown of P'ohang, and, to help support his family, Lee sold rice snacks during the day and attended school at night. He enrolled at Korea University, Seoul, in 1961, paying his tuition by working as a garbage collector. He was imprisoned in 1964 for participating in protests against the normalization of relations between South Korea and Japan.

Lee was blacklisted by the government for his student activism, which limited his job prospects with some of the larger established firms. He joined the fledgling Hyundai Construction company in 1965. At the time, it had fewer than 100 employees, and Lee advanced quickly through the executive ranks. When he resigned as CEO in 1992, the Hyundai Group had some 160,000 employees, and its products ranged from automobiles to heavy machinery to consumer electronics.

Lee entered politics in 1992, winning election to the National Assembly as a member of the conservative New Korea Party. He was reelected in 1996, only to resign two years later after he was found guilty of violating campaign spending limits. He withdrew from politics and spent a year of self-imposed exile in the United States. He returned to South Korea and was elected mayor of Seoul in 2002. His administration focused on improving the livability of the central business district, most notably through an ambitious urban beautification project. This included the restoration of the Cheonggye stream, a downtown waterway paved over by Hyundai some four decades earlier. While business owners initially balked at the project's $900 million price tag, it proved to be a success with both Seoul natives and tourists when it opened in September 2005.

Upon completion of his term as mayor, Lee successfully campaigned for the presidency of South Korea, winning election by a landslide on Dec. 19, 2007. A 2001 business scandal surfaced in the days leading up to the election, however, and the matter was directed to an independent counsel.