Lee, 60, the populist candidate of the opposition Democratic Party, is to take office on Wednesday for a single five-year term, succeeding Yoon Suk-yeol, a conservative who was felled over his stunning yet brief imposition of martial law in December.
It was unclear whether Lee's election would cause any major immediate shift in South Korea's foreign policy.
Lee, previously accused by critics of tilting toward China and North Korea and away from the United States and Japan, has repeatedly stressed South Korea's alliance with the US as the foundation of its foreign policy.
The toughest external challenges awaiting the new president are US President Donald Trump's tariff policy and North Korea's advancing nuclear program.
But experts say whoever becomes president cannot do much to secure major progress in South Korea's favour on those issues.
As of 3am on Wednesday, with more than 97 per cent of the votes counted, Lee obtained 49 per cent of the votes cast while main conservative contender Kim Moon-soo trailed with 41.6 per cent - a gap of more than 2.5 million votes that was impossible to overcome mathematically.
Pre-election surveys have long suggested Lee appeared headed for an easy win, riding on deep public frustration over the conservatives after Yoon's martial law debacle.
Even before Lee's win was formally declared, Kim conceded, telling journalists he "humbly accepts the people's choice" and congratulated Lee.
Earlier, Lee appeared before thousands of cheering supporters in the streets of Seoul.
He did not formally claim victory but reiterated his major policy goals such as revitalising the economy, promoting peace with North Korea and easing a domestic divide.
"Let us move forward with hope and make a fresh start from this moment on," he said.
"Though we may have clashed for some time, even those who did not support us are still our fellow citizens of the Republic of Korea."
Lee, who served as governor of Gyeonggi province and mayor of Seongnam city, has been a highly divisive figure in politics for years.
As a former child labourer known for his inspirational rags-to-riches story, Lee came to fame through biting criticism of the country's conservative establishment and calls to build a more assertive South Korea in foreign policy.
That rhetoric has given him an image as someone who can institute sweeping reforms and fix the country's deep-seated economic inequality and corruption.
His critics view him as a dangerous populist who relies on political division and back-pedals on promises too easily.
