Lee was born in Atlanta, Georgia, the son of Jacqueline Shelton, a teacher of arts and black literature, and William James Edward Lee III, a jazz musician, and composer. Lee moved with his family to Brooklyn, New York when he was a small child. The Fort Greene neighborhood is home of Lee's production company, 40 Acres & A Mule Filmworks, and other Lee-owned or related businesses. As a child, his mother nicknamed him "Spike." In Brooklyn, he attended John Dewey High School. Lee enrolled in Morehouse College where he made his first student film, Last Hustle in Brooklyn. He took film courses at Clark Atlanta University and graduated with a B.A. in Mass Communication from Morehouse College. He then enrolled in New York University's Tisch School of the Arts. He graduated in 1978 with a Master of Fine Arts in Film & Television.

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