Lee surged home with a final-round seven-under-par 65 to claim the clubhouse lead before good friend and two-time major winner Collin Morikawa pipped him by a shot.
The American birdied to last hole amid great tension to finish at 22 under for the tournament and walk off with the $US3.6 million ($A5.1 million) winner's cheque.
Revelling with a new putter and driver, the resurgent Lee finished joint runner-up with Austrian Sepp Straka, who eagled the last in a closing 68.
"A great week. Obviously just shy of making the play-off but I gave it my all," Lee said.
"I'm very proud of the way I handled myself today and the end of the week. Played a lot of good golf, which is nice.
"It's been trending so it's been good and hopefully we can keep the form going."
Lee started the day five shots adrift of third-round frontrunner Akshay Bhatia - who faded to a tie for sixth at 19 under after a Sunday 72 - but quickly surged up the leaderboard with four birdies on the front nine.
He stumbled with his lone bogey of the day on the par-4 10th hole to slip two shots behind again.
But Lee rolled in consecutive birdies on 12 and 13, then drained a brilliant downhill curling putt on the par-3 17th to give himself a sniff.
He powered to 21 under, one ahead of world No.1 Scottie Scheffler, with his eighth birdie of the round on the par-5 18th.
The 27-year-old then had to play an anxious waiting game as Morikawa clung to a one-shot lead with two holes to play.
The former PGA and British Open champion duly stumbled when he bogeyed 17 after sending his tee shot into the right rough and couldn't get up and down.
That left Morikawa needing to birdie or eagle the last to avoid a play-off with Lee.
Adding to the drama, the leader had to wait for some 20 minutes to play his approach shot into the 18th as countryman Jacob Bridgeman made a mess of the hole in racking up a costly bogey literally from the pebbles on the beach.
But the former world No.2 held his nerve to hit his 4-iron to a centimetre off the green and knock his first putt to within two feet.
Scheffler had earlier stormed home in his typical Sunday fashion with a blazing nine-under 63 full of fireworks to rally from eight shots back and briefly snare the clubhouse lead.
He amassed six birdies and three eagles but ultimately paid for three bogeys in a spectacular finish.
In the end, Lee will forever lament a cruel end to his third round when he bogeyed the last hole as his ball oscillated in the fierce winds whipping up off the ocean.
That dropped shot ultimately proved the difference as Morikawa notched his seventh PGA Tour victory.
Lee's consolation for almost adding to his Houston Open triumph last year, when he also upstaged Scheffler down the stretch, is a $US1.76 million ($A2.49 million) pay day and a rankings rise from 52nd to world No.31.
He has usurped Jason Day as Aussie No.1, once again joining his superstar sister Minjee as the nation's top player seven weeks out from the Masters, the season's first major championship at Augusta National.
