Scott just missed a putt on the 12th hole that would have tied the pair at the top of the leaderboard.
But the 2013 Masters champion, chasing his first title since early 2020, stumbled on his way home to card an even par 71 and remain 11 under.
He came desperately close to clawing back some ground with a great approach to the last hole but Scott’s birdie putt lipped out and Lee scrambled to make par.
Woo Lee has a real shot at winning the Australian PGA Championship after heading out to a three-stroke lead heading into the final day
Veteran Adam Scott was drawn to play with Woo Lee on Saturday but came off second best against the rising star
Japan‘s Rikuya Hoshino (64) ran riot on the back nine with six birdies to claim outright second at 14 under, while Curtis Luck (13 under) moved ahead of Scott into third.
Fresh off earning full US PGA Tour playing rights, world No.45 Lee produced another remarkably steady round.
He avoided disaster after finding trees on the ninth and for the third straight day made just a solitary bogey.
The 25-year-old missed a chance to blow the tournament open when his low-flying approach to 15th hole zipped up the bank to within four metres of the hole.
But his eagle putt slid by, Lee arching his back in anguish before tapping in for birdie to move to 16 under.
He added another on the 16th and then navigated the 17th party hole despite going over the back of the green for the second straight day.
Cameron Smith crashed out on Friday after enduring the worst round of his professional golfing career to date
Starting one shot clear, rising star Lee built a buffer of four shots with a birdie on the seventh.
But three holes later that lead was just one, Scott with a tap-in birdie on the ninth as Lee scrambled from the trees to make par and another on the 10th to heap the pressure on.
Scott had a putt to draw level on the 11th stall just short of the hole in a moment that could have swayed momentum.
Earlier Michael Hendry, back on tour after a blood cancer diagnosis in April, soared from even par to seven under with a bogey-free round of 64.
The New Zealander thought he had missed the cut when he walked off the course on Friday, surviving only when it dropped from one under in the final stages of play.