The United Nations agency confirmed at the opening of its annual assembly that Dr Lee, 61, died in a Geneva hospital, even though his condition was said to be "recovering" after emergency surgery on Saturday.
He had been rushed to hospital after becoming ill during an official engagement.
Spanish health minister Elena Salgado, who is chairing the assembly, made the announcement to the hushed gathering of ministers and senior officials from 192 countries.
"I regret to inform you that Dr Lee Jong-Wook, director-general of the World Health Organisation, died this morning," Ms Salgado said.
"For all of us, this is very sad news," she added.
The assembly observed a one minute silence before suspending the session.
"All of the staff of the World Health Organisation extend their most sincere condolences to Dr Lee's family. The sudden loss of our leader, colleague and friend, is devastating," said a WHO statement announcing his death.
"Dr Lee led WHO to continue its mission to help people attain the highest possible level of health."
Dr Lee, a long standing specialist on tuberculosis at the UN health agency, was elected to lead the WHO in 2003 for a five year term.
From South Korea, he had led the agency's efforts to combat bird flu and prepare for a potential human bird flu pandemic.