The South Korea international had reportedly reached an agreement with the Chinese champions last week but has now opted to sign a new deal in Qatar
The Chinese champions had claimed last week that the 31-year-old central defender, who helped Al Sadd lifted the 2011 AFC Champions League, had reached an agreement with them over a transfer.
However, Al Sadd club officials have confirmed Lee has inked a new deal with the Qatari club.
Guangzhou were reportedly interested in adding Lee to their roster ahead of their 2012 AFC Champions League quarterfinal against Al Ittihad. The Chinese club's Asian player, Cho Won-Hee, is currently injured.
Meanwhile, Al Sadd officials also confirmed new coach Hussein Amuta would link up with the side on Friday.
The Moroccan was unveiled as the club's new boss earlier this month after Jorge Fossati decided to return to South America.