The South Korea international has been a mainstay in the Trotters team this season, starting in all of their Premier League fixtures and weighing in with two goals.
The 22-year-old has been in fine form of late, providing two assists in the win at Wolverhampton Wanderers before scoring in last weekend's 5-1 demolition of Newcastle United.
And Coyle has rewarded Lee, who arrived from FC Seoul last summer, with a new deal at the Reebok Stadium.
The White boss said: "We have signed Lee on a contract extension. It is great news for the club that such a talented player will be here for a long time."
Lee, who is now tied to Bolton until 2013, follows in the footsteps of team-mates Fabrice Muamba, Stuart Holden and Danny Ward in signing a contract extension at the Lancashire club.
Coyle, who arrived in January from Burnley, believes the future is looking ever brighter at the club, not least because they sit fifth in the Premier League table ahead of the weekend clash with Blackpool.
He said: "These extensions show we are looking to build a club. I am very forward thinking in trying to improve and help these young players on our journey.
"With the talent he has Lee is getting better day by day and I am thrilled he has signed up.
"What I am wary of is we do not burn him out as he has played two years without a break. He managed to have three weeks off after the World Cup that's all."
Bolton v Blackpool 1st Goalscorer: Lee, C. 10/1
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