Lee became manager when Sam Allardyce decided to leave the club in April.
“This has been a difficult decision for all parties but we have agreed the time is right,” Bolton chairman Phil Gartside told the club’s website.
Gartside added: “Sammy has played an important role in the club’s recent history. We wish Sammy and Frank well for the future.
“Our efforts will now be to look for a replacement manager to concentrate on the future.”
