Born in Manchester, Lee studied at Manchester School of Art and at Colorossi's in Paris. There is no record of his studying in St Ives but he visited regularly. After visits to the St Ives Arts Club in October 1896, and again in 1899, the Secretary of the Newlyn Gallery, Phil Whiting, addressed Lee with an invitation to exhibit at NAG. Lee replied from his Holland Park Road Studio (6 The Studios) to say that he would be pleased to send two of his colour prints for the forthcoming exhibition, but could not send more as his others were engaged elsewhere.

As a painter and printmaker, he was known for mountain landscapes, town scenes and architectural subjects from tours in Europe. He was a seminal force in the revival of wood engraving in Britain. He married Edith Mary Elgar, daughter of Frederick Elgar of Rochester, Kent in 1893. The couple lived in Holland Park Road, Kensington from 1909 and had no children. Most respected for his 'black and white' work, his exhibits with STISA were largely restricted to wood engravings and aquatints (although he was also a printmaker, and versatile in a wide range of media). The Sloop Inn, St Ives (1904) was included in both NAG and STISA exhibitions, and The Harbour, St Ives is another of his titles.

On page 107 of her 1936 autobiography Oil Paint and Grease Paint, Laura Knight writes of her time in Staithes, Yorkshire: "Sydney Lee, whom we never knew when he was staying at a cottage up the valley, made a colour print of the old trestle bridge." In 1904, he exhibited On the Bridge, Evening at NEAC, and, in 1905, The Bridge  at RBA.