Lee's history with the Anfield side began as a midfielder between 1976 and 1986, during which time he scored 19 goals in 295 appearances.
When he retired from playing, he returned as reserve team coach in 1993 before progressing to first-team coaching. He left in 2004 but returned under Rafael Benitez in 2008 as assistant manager, where he has remained since.
The reasons for Lee’s departure are unclear. It is expected that Steve Clarke, brought in as first-team coach this January, will take his place.