Lee, 56, was suspended indefinitely by the team on June 15 after being arrested and charged for harassment following an incident in Buffalo, New York, earlier this year.
Lee released a statement following his resignation on Tuesday.
"My suspension has given me more time to spend with my loved ones than ever before," the statement read. "For the past 23 years, my family has taken a back seat to my career. My focus now is on putting them first.
"At the same time, I have to think about my obligations to the hockey team. They need an assistant general manager who can focus completely on the coming season. Until this is behind me, however, I'm not in a position to [do] that.
"For this reason -- in consultation with the Ottawa Senators and my family -- I have chosen to resign as Assistant General Manager of the Ottawa Senators and as General Manager of the Belleville Senators."
The Senators provided no further comment on Lee's resignation.
While attending the NHL's rookie scouting combine in Buffalo, Lee allegedly acted inappropriately towards to a 19-year-old male shuttle driver while being transported back to his hotel. The teenage driver claims Lee rubbed his shoulders during the ride and continued to do so even after being asked to stop. Lee also allegedly made a lewd comment about his genitals.
The driver reported the incident to hotel security and Lee was arrested by the Buffalo police following an investigation. He was charged with two counts of harassment.
Lee pleaded not guilty to both charges and has continues to claim innocence through his representation. His lawyer is seeking to have the charges dismissed, saying Lee did nothing illegal and the accuser is financially motivated.
"They're looking for money," Lee's attorney, Paul Cambria, told The Athletic in July. "To me, once a lawyer calls me with something like this — if you believe everything that's alleged, the guy said he got his shoulder rubbed and now he said he wants money from Randy and the team. You can fill in the blanks there."
The team initially waited to suspend Lee until two weeks until after he was charged. He has spent 23 seasons with the club, the last four as assistant GM.