Lee, ranked 256th and whose best finish in 2013 was a tie for 19th at the Evian Championship, had an eagle and seven birdies in a final round that saw her leap 20 places into the lead with a total of 9-under 207.
Sixteen-year-old New Zealander Ko, the world No. 4, had a long birdie putt on the final green for a chance to force a play-off to the 54-hole event at the Clearwater course in Christchurch. But in front of huge home gallery, she left her effort short as she carded a two-under 70.
Ko and her playing partners, Americans Beth Allen and Anya Alvarez, all stood on the final tee one shot off the clubhouse lead.
Both Allen and overnight leader Alvarez bogeyed the hole after their approaches missed the green to fall back into a tie for third with South Korean Seon Woo Bae.