Byun made her entertainment debut when she won the 71st Miss Chunhyang Pageant in 2001. Using the stage name Lee Da-hae, she began to appear in minor and supporting roles in television dramas.

In 2004, Lee was cast in her first leading role in the Im Sung-han drama Lotus Flower Fairy (also known internationally as Heaven's Fate), in which she played the pure-hearted daughter of a shaman who becomes alienated by her family and society after her identity is revealed. She won Best New Actress at the 41st Baeksang Arts Awards for her performance.

But 2005 would become Lee's breakout year. She showcased her versatility in two successful, but very different series. In Green Rose, her character falls in love with a man who gets framed for the attempted murder of her father; years later, she becomes slowly convinced that a doppelgänger is in fact, her boyfriend whom everybody had assumed was dead. In My Girl, she played a lovable con Artist who agrees to act as a hotelier's long-lost cousin in order to fulfill his grandfather's last wishes. My Girl, in particular, shot Lee to domestic and Korean Wave stardom.

She returned to the romantic comedy genre in 2007 with Hello! Miss. Lee played the last living daughter of a once-respected clan in the countryside whose traditional feminine virtues is put to the test when the son of a rich investor demands that she sell her ancestral house to him.

In 2008, she starred in Robber, in the role of a young widowed single mother who is targeted by a con man for her savings, but he falls in love with her for real. Later that year, Lee was originally cast as the heroine in the inter-generational epic East of Eden, set against the backdrop of a coal mining town in Taebaek through the 1960s until the present. Though the drama was a hit, as it went on, Lee's screen time became drastically reduced in favor of other storylines, such that she decided to leave the show in episode 40.

Lee joined Rain's agency J. Tune Entertainment in 2009, then appeared in the music video for "Pas de Deux" with Taiwanese singer/actor Will Pan. She was also admitted to Konkuk University, where she majored in Theater and Film.

In 2010, Lee starred in the hit Joseon period/fusion drama The Slave Hunters, in which she played Un-nyun, who is torn between her past love, a yangban-turned-slave hunter, and her present companion, a general-turned-slave. Early in the series, some viewers criticized her for having pristine makeup and manicured nails despite portraying a slave on the run, for allegedly wearing a wrist watch onscreen, and her supposedly "inappropriate and gratuitous" cleavage exposure when her hanbok top was removed in an attempted rape scene. Lee opined that those issues weren't a big deal, and had only been magnified by the show's popularity. Her character also received criticism for being an overly passive damsel in distress, and a "Public Menace Un-nyun" (민폐언년) meme circulated, to the extent that Writer Chun Sung-il issued a public defense and apology towards Lee.

In 2011, Lee played an antiheroine with a traumatic past who lies and manipulates her way up the hotel executive ladder and into the hearts of two powerful men in Miss Ripley. She called the role "a turning point in her acting career." Lee's character was inspired by Shin Jeong-ah, a former curator convicted for fabricating her academic credentials and embezzling funds, and the title references the Hollywood film The Talented Mr. Ripley.

Lee, who is fluent in English and Mandarin, and has a significant fan base in China with more than six million followers on her Weibo microblog, made her Chinese television drama debut in 2012. Previous Korean actresses who had appeared in Chinese productions spoke their lines in Korean and were later dubbed, but Lee worked hard to master the language and fully memorized her lines, making her the first Korean Actress to perform in Mandarin. In Love Recipe (internationally known as Love Actually) opposite Taiwanese actor Joe Cheng, she played a part-timer raising her niece on her own who discovers her talent for cooking at a dim sum restaurant and dreams of becoming a chef. It was shot in Shanghai and aired on Hunan TV. Also that year, her contract with DBM Entertainment ended, and she signed with a new agency, Forestar Entertainment.

In December 2013, Lee filed defamation charges against Internet users who spread malicious rumors claiming she had been involved in an upscale Celebrity prostitution ring. Prosecutors cleared Lee of the allegations, stating that she was not one of the entertainers being investigated.

Lee signed with a new agency, FNC Entertainment in 2014. She reunited with previous My Girl costar Lee Dong-wook in Hotel King, in which she played an heiress trying to save the family-owned seven-star hotel. After Hotel King ended, Lee landed seven endorsement deals with clothing and cosmetic brands across Asia.

On September 6, 2016 a exclusive report from Sports Chosen reported that Lee and singer Se7en have been dating for over a year.

In 2018, Lee is set to return to the small screen in Korea, starring in SBS' drama Good Witch.