Yamaguchi was considered by many Chinese in the post-World War II period to be a Japanese spy and thus a traitor to the Chinese people. This misconception was caused in part by Yamaguchi passing herself off as Chinese throughout the 1930s and 1940s. Her Japanese identity not being officially revealed until her post-war persecution nearly led to her execution as a Chinese traitor. She had always expressed her guilt for taking part in Japanese propaganda films in the early days of her acting career. Because of this, she did not visit China for about 20 years after the war, since she felt that the Chinese had not forgiven her. Despite her controversial past, Li Xianglan influenced Future Singers who covered her evergreen hits (such as Teresa Teng, Fei Yu-Ching, and Winnie Wei 韋秀嫻). Hong Kong superstar Jacky Cheung recorded a cover of Tamaki Kōji's "行かないで" ("Ikanaide") and renamed it "Lei Hoeng Laan." (The original version doesn't have any references to Li Xianglan and nor does the remake. The Chinese title instead refers to the unknowable quality/identity of the singer's lover.) In January 1991, a musical about her life was released in Tokyo, which generated controversy because its negative portrayal of Manchukuo upset many Japanese conservatives.

Yoshiko made her debut as an Actress and singer in the 1938 film Honeymoon Express 蜜月快車, by Manchuria Film Production. She was billed as Li Xianglan, pronounced Ri Kōran in Japanese. The adoption of a Chinese stage name was prompted by the film company's economic and political motives—a Manchurian girl who had command over both the Japanese and Chinese languages was sought after. From this she rose to be a star and Japan-Manchuria Goodwill Ambassadress (日満親善大使). The head of the Manchukuo film industry, General Masahiko Amakasu decided she was the star he was looking for: a beautiful Actress fluent in both Mandarin and Japanese who could pass as Chinese and who had an excellent singing voice. The Chinese actors who appeared in the Manchuria Film Productions films were never informed that she was Japanese, but they suspected she was at least half-Japanese as she always ate her meals with the Japanese actors instead of with the Chinese actors, was given white rice to eat instead of the sorghum given to the Chinese, and was paid ten times more than the Chinese actors were. Though in her subsequent films she was almost exclusively billed as Li Xianglan, she appeared in a few as "Yamaguchi Yoshiko." Many of her films bore some degree of promotion of the Japanese national policy (in particular pertaining to the Greater East Asia Co-prosperity Sphere ideology) and can be termed "National Policy Films" (国策映画).

The 1940 film China Nights (支那の夜), also known as Shanghai Nights (上海の夜), by Manchuria Film Productions, is especially controversial. It is unclear whether it was a "National Policy Film" as it portrays Japanese Soldiers in both positive and negative Lights. In this film, Li Xianglan played a young woman of extreme anti-Japanese sentiment who falls in love with a Japanese man. A key turning point in the film has the young Chinese woman being slapped by the Japanese man, but instead of hatred, she reacts with gratitude. The film was met with great aversion among the Chinese audience as they believed that the Chinese female character was a Sketch of debasement and inferiority. 23,000 Chinese people paid to see the film in 1943. But after the war, one of her classic songs, "Suzhou Serenade" (蘇州夜曲), was banned in China and continues to be. A few years later when confronted by angry Chinese reporters in Shanghai, Yoshiko apologized and cited as pretext her inexperienced youth at the time of filmmaking, choosing not to reveal her Japanese identity. Though her Japanese nationality was never divulged in the Chinese media until after the Sino-Japanese War, it was brought to light by Japanese press when she performed in Japan under her assumed Chinese name and as the Japan-Manchuria Goodwill Ambassadress. Oddly enough, when she visited Japan during this period, she was criticized for being too Chinese in dress and in language.

When she landed in Japan in 1941 for a publicity tour, dressed in a cheongsam and while speaking Japanese with a Mandarin accent, the customs officer asked her upon seeing she had a Japanese passport and a Japanese name: "Don't you know that we Japanese are the superior people? Aren't you ashamed to be wearing third-rate Chink clothes and speaking their language as you do?"

In 1943, Yoshiko appeared in the film Eternity (萬世流芳). The film was shot in Shanghai commemorating the centennial of the Opium War. A few top Chinese stars in Shanghai also appeared in the film and consequently endured the repercussions of controversy. Though the film, anti-British in nature, was a collaboration between Chinese and Japanese film companies, its anti-colonization undertone might also be interpreted as a satire of the Japanese expansion in east Asia. Despite all this, the film was a hit and Yoshiko became a national sensation. Her film theme songs with jazz/pop-like arrangements such as "Candy-Peddling Song" (賣糖歌) and "Quitting (Opium) Song" (戒煙歌) elevated her status to among the top Singers in all Chinese-speaking regions in Asia overnight. Many songs recorded by Yoshiko during her Shanghai period became classics in Chinese popular music history. Other noteworthy hits include "Tuberoses"/"Fragrance of the Night" (夜來香), "Ocean Bird" (海燕), "If Only" (恨不相逢未嫁時), and "Second Dream" (第二夢). By the 1940s, she had become one of the Seven great singing stars.

At the end of World War II she was arrested by the Chinese government for treason and collaboration with the Japanese. After her childhood Russian friend helped locate Yamaguchi's Japanese birth certificate, she was cleared of all charges, and possibly the death penalty, since she was not a Chinese national after all. Before long in 1946, she resettled in Japan and launched a new acting career there under the name Yoshiko Yamaguchi, working with Directors such as Akira Kurosawa. Several of her post-war films cast her in parts that dealt either directly or indirectly with her wartime persona as a bilingual/bicultural performer. For Example in 1949, Shin-Toho studios produced Repatriation (帰国「ダモイ」), an omnibus film which told four stories about the struggles of Japanese trying to return to Japan from the Soviet Union after having been taken prisoners after the defeat. The following year, Yamaguchi starred with actor Ryo Ikebe in Escape at Dawn (暁の脱走) produced by Toho and based on the novel Shunpuden (春婦伝). In the book, her character was a prostitute in a military brothel, but for this film her character was rewritten as a frontline entertainer who falls into a tragic affair with a deserter (Ikebe). In 1952, Yamaguchi appeared in Woman of Shanghai (上海の女) in which she reprised her pre-war persona as a Japanese woman passing for Chinese, who becomes caught between the two cultures.

A recording of a 1950 concert performance in Sacramento, California was uncovered by a professor from the University of Chicago in 2012. The concert included six songs and was performed before an audience of Japanese-Americans, many of whom had likely been interned during World War II. Speaking in 2012 about the concert, Yamaguchi said: "I sang with hope that I could offer consolation to the Japanese-Americans, as I heard that they had gone through hardships during the war." She died at the age of 94 in Tokyo in 2014 on the same day as one of her fellow Seven great singing stars Gong Qiuxia.

She was credited as Shirley Yamaguchi in the Hollywood movies Japanese War Bride (1952) and House of Bamboo (1955). She was once nicknamed The Judy Garland of Japan.

In 1969, she became the host of The Three O'Clock You (Sanji no anata) TV show on Fuji Television, reporting on the Israeli-Palestinian dispute as well as the Vietnam War. In the 1970s, Yamaguchi became very active in pro-Palestinian causes in Japan. In 1974, she was elected to the House of Councillors (the upper House of the Japanese parliament) as a member of the Liberal Democratic Party, where she served for 18 years (three terms). She co-authored the book, Ri Kōran, Watashi no Hansei (Half My Life as Ri Kōran). She served as a Vice-President of the Asian Women’s Fund. As part of the 1993 autumn honours list, she was decorated with the Gold and Silver Star of the Order of the Sacred Treasure, Second Class.

She was elected as a member of the Japanese parliament in the 1970s and served for 18 years. After retiring from politics, she served as vice President of the Asian Women's Fund.