Uli Stielike's side were comfortable in Sydney on Monday, with a goal in each half wrapping up a deserved win.
After a dominant opening Lee was on hand to break the deadlock in the 20th minute with his second goal of the tournament.
Kim Young-gwon extended South Korea's lead early in the second half as a deflected strike beat Jalal Hassan Hachim and Iraq needed their goalkeeper to keep them in the game with saves from Ki Sung-yong and Son Heung-min.
Iraq slowly began to force their way back into the game as South Korea's nervous defending presented openings, but they were unable to convert, with Younis Mahmood guilty of missing the best of the chances.
The victory exacts some revenge for South Korea having lost the 2007 semi-final to Iraq on penalties and they will now wait to see whether it will be host nation Australia or United Arab Emirates who they face in Saturday's final.
South Korea made a positive start to the match in a rain-sodden Sydney and could have taken the lead inside five minutes as Han Gyo-won peeled away from Dhurgham Ismail, but failed to connect with Ki's lofted pass.
Iraq's early openings were restricted to fruitless counter-attacks, but they nearly got caught out after 19 minutes as the dangerous Son broke forward.
With the defenders backing off he unleashed a powerful effort from 20 yards that Hachim was able to tip over the crossbar.
A minute later he was beaten, though, as Kim Jin-su delivered an inviting free-kick into the penalty area that Lee glanced past Hachim from close range.
As half-time approached Iraq began to find their footing in the game while South Korea appeared to lose their way and Amjad Kalaf nearly punished them with a 20-yard drive.
The midfielder found space on the edge of the penalty area, but Kim Jin-hyeon was able to get down well and push his effort wide.
Refreshed from the break South Korea resumed their attacking football and five minutes into the second half Kim Young-gwon doubled their advantage.
Lee superbly chested a high ball into the defender's path and he produced a controlled volley that deflected off Salam Shakir on its way past Hachim.
The Iraq goal was leading a charmed life as South Korea began to pepper it with chances, both Ki and Son unable to beat Hachim with efforts from outside the penalty area.
They did not have it all their own way, though, as Iraq – whose place in the semi-final was only confirmed after an appeal from Iran over an ineligible player in the quarters was rejected – finally began to threaten.
Kalaf took too long when presented with their first opening, before Mahmood had two efforts to halve the deficit blocked by resolute South Korean defending.
In the closing minutes chances continued to fall Iraq's way, but, try as they might, a goal did not arrive and South Korea moved a step closer to ending their 55-year wait for an Asian Cup triumph.
