Marchant, who took Olympic bronze in 2016, tried to go on the attack in both heats but could not then hold off the fast-finishing Lee down the straight.
It means Marchant will leave the Games empty-handed after her keirin hopes were ended by a crash on Thursday. Leeds cyclist Marchant had been one of the favourites for the women’s keirin but a nasty crash with Laurine van Riessen – that left the Dutch rider in hospital with broken ribs, collarbone and a lung contusion – saw her exit at the quarter-final stage on Thursday.
Six-time Olympic champion, Sir Chris Hoy, backed the Leeds cyclist to recover from the disappointment. He said on the BBC: "Katy Marchant shouldn't be too down on herself. It's not the way she wanted to go out and the keirin was a blow with the crash.
"Everyone is talking about Paris already because it's only three years away.
"I think she will go away, lick her wounds, have some downtime and recover. Hopefully she'll be back in three years for more."