Lee was due to be loaned back to Bolton, where he spent six years before joining Palace in February 2015.
A deal failed to materialise, however, with the 29-year-old's representatives, Inspo Korea, telling the Yonhap news agency it was his manager, Roy Hodgson, who pulled the plug.
It is claimed that Hodgson made 'an urgent request' for Lee not to be released after another Palace winger, Bakary Sako, suffered an injury against West Ham United on Tuesday.
And Lee, it seems, was not best pleased. "It makes me flustered as the loan deal was cancelled due to my teammate's sudden injury," the player said, as quoted by Yonhap. "I'll forget what's happened. Now, I'll just try hard and give my best on the pitch for the remainder of the season."
Lee has only played 271 minutes of club football this season, across just six matches.
Sako's injury could boost his first team chances, however, although the 78-cap South Korean would have to make quite an impression to remain at Crystal Palace, where his contract is due to expire in June, beyond the end of the campaign.
Will Lee get his chance at Crystal Palace after his Bolton move fell through?