SYDNEY, 19 Feb 2015 (AFP) - World No.1 Lydia Ko was looming in a three-way tie for third after opening with a three-under 70, which included an eagle on the par-five 14th.
There were 49 players at one over or better on a packed leaderboard, among them England's Melissa Reid and Charley Hull and veteran French player Gwladys Nocera.
Lee, winner of the 2013 Bahamas Classic on the LPGA Tour, said she wanted to become as famous as some of her supremely-talented countrywomen.
Lee has led just once after the first round of an LPGA Tour event –- in Malaysia in 2013 when she finished third.
Lee said she only made a late decision to come to Melbourne after her coach convinced her she had the game to contend on a course that claimed her before the cut in her only previous appearance in 2012.
"It’s good to see how improved my golf is this year because I was here in 2012 (and) how I see the golf course at that time and now (is) totally different," she said.
"It’s really, really fun to see how much I have improved since then."
Ko battled a persistent cough to contend in the opening round, but Ariya overshadowed the Kiwi sensation.
At 19 and in an injury-interrupted career, the Thai star has never finished worse than 11th in seven previous LPGA Tour starts and has the power game to help tame Royal Melbourne’s par fives.
Ariya first leapt to prominence when she earned a spot in the 2007 Honda LPGA Thailand at the age of 11, making her the youngest player ever to qualify for an LPGA tournament.
Ko's best moment in Thursday's round was a 12-metre eagle putt on the par-five 14th.
"It's definitely good to start off well here," said the 17-year-old, who became golf's youngest-ever world No.1 earlier this year.
"It's a tough course and I tried to stay patient.
"I didn't hole that many putts but I didn't make that many mistakes with it either, so that's important," she said.
Leading first-round scores in the LPGA Women's Australian Open at Royal Melbourne (par 73) on Thursday (Australia unless stated):
68 - Lee Il-Hee (KOR)
69 - Ariya Jutanugarn (THA)
70 - Alena Sharp (CAN), Min Seo-Kwak (KOR), Lydia Ko (NZL)
71 - Melissa Reid (ENG), Jang Ha-Na (KOR), Charley Hull (ENG), Gwladys Nocera (FRA), Brooke Pancake (USA), Paz Echeverria (CHI)
72 - Ryann O'Toole (USA), Marion Ricordeau (FRA), Ayako Uehara (JPN), Katherine Kirk, Rebecca Artis, Jessica Korda (USA), Chella Choi (KOR), Mariajo Uribe (COL), Marina Alex (USA), Tiffany Joh (USA), Min Lee (TPE)
73 - Mika Miyazato (JPN), Park Ju-Young (KOR), Karrie Webb, Ai Miyazato (JPN), Julieta Granada (PAR), Amy Yang (KOR), Holly Clyburn (ENG), Sydnee Michaels (USA), Rachel Hetherington, Sophie Walker (ENG)
74 - Danah Bordner (USA), Feng Shanshan (CHN), Lorie Kane (CAN), Christina Kim (USA), Haru Nomura (JPN), Jennifer Song (USA), Baik So-Jin (KOR), Katie Burnett (USA), Alison Walshe (USA), Garrett Phillips (USA), Karlin Beck (USA), Jenny Gleason (USA), Cheyenne Woods (USA), Catriona Matthew (SCO), Choi Na-Yeon (KOR), Kelly Tan (MAS), Maria McBride (SWE)
Selected scores:
75 - Chloe Leurquin (BEL), Anne-Lise Caudal (FRA), Seon Hwa-Lee (KOR), Gerina Piller (USA), Mallory Blackwelder (USA), Kelly W Shon (KOR), Lisa McCloskey (USA), Therese Koelbaek (DEN), Maria Hernandez (ESP), Marta Sanz Barrio (ESP), Christine Wolf (AUT), Marianne Skarpnord (NOR), Valentine Derrey (FRA), Mina Harigae (USA), Mi Hyang Lee (KOR), Beatriz Recari (ESP), Karine Icher (FRA), Kris Tamulis (USA), Kylie Walker (USA), Kristy McPherson (USA)
76 - Dori Carter (USA), Jennifer Johnson (USA), Christel Boeljon (NED), Carly Booth (SCO), Sophie Gustafson (SWE), Camilla Lennarth (SWE), Cheng Ssu-Chia (TPE), Becky Morgan (WAL), Pernilla Lindberg (SWE), Ji Eun-Hee KOR), Jenny Shin (USA), Feng Simin (CHN)