The Malaysian badminton great spoke out after his country lost 3-0 to China in the final of the men's competition at the Asia Team Championships in Kuala Lumpur on Sunday.
China were far superior despite not fielding their strongest side. India lifted the women's crown, with hosts Malaysia failing to get beyond the quarter-finals.
The tournament offered ranking points towards this summer's Paris Olympics.
"I know the truth hurts, but I think Malaysian badminton will only go downhill from here if nothing is done," Lee was quoted as saying by The Star newspaper.
"Right now I feel like giving up on Malaysian badminton," added Lee, who retired in 2019 after a career that included three Olympic silver medals and three world silver medals.
The long-time former world number one said Malaysia's badminton authorities had to do more to promote younger players, while accusing the players of lacking discipline and commitment.
"We have to make some drastic changes," the 41-year-old added.
"If not, we will be left behind, left far behind, and badminton will no longer be one of the top sports in this country.
"I really can't bear to face that."
