It is the first major appointment by chief executive Paul Lawson, who is on a mission to "reboot" the agency since joining from Leo Burnett London last October.
Lee worked with Lawson and chief creative officer Jon Burley at Leo Burnett during her eight-year stint there – latterly as managing director.
She will be Lawson’s chief lieutenant as he tries to turn around the fortunes of an agency that has lost several major accounts in recent years, including Marks & Spencer, Lloyds Bank and Jaguar Land Rover.
As well as day-to-day operational duties, Lee has been tasked with leading the agency’s marketing and new-business activity, as well as working across key accounts.
The role has been vacant since Priya Patel left the agency last year.
Lawson said: "Katie brings serious experience and professionalism to our plans to grow the agency.
"If we are going to move upstream, and once again operate as partners to our clients, we need people with Katie’s experience and knowledge to be able to lead those grown-up conversations and ensure we are demonstrating a real return on our clients’ investment in their agency."
Lee joined the ad industry 19 years ago and has worked across disciplines, from above-the-line to direct marketing, and before joining Leo Burnett in 2007 had experience at Bartle Bogle Hegarty, Saatchi & Saatchi and Collett Dickenson Pearce.
She was hired by Leo Burnett as a client service director to work on McDonald’s and was eventually promoted to managing director in 2014, a role in which she retained duties of her previous role as group marketing director.
However, she left the Publicis Groupe agency later that year to join Gravity Road, before moving to the same role at entertainment specialists Sunshine last year, where she ran the UK business as it expanded into the US.
Lee added: "Y&R feels like a start-up with backing. With such incredible resource behind it, it’s an exciting time to build and shape a company into what a modern agency should be.
"And of course, working with Paul and Jon again just adds to the excitement. In my experience team is everything; teams win pitches, teams create culture and teams build agencies. I know from day one we will be operating at 100% as we already have the trust in place to take Y&R where we want it to go."