Lee also worked as a producer, producing many of the ska singles by The Maytals, and his entrepreneurial skills led to him setting up the Byron Lee's Spectacular Show tour, which involved several Jamaican acts (including The Maytals) touring the Caribbean. He also became the head of distribution in Jamaica for Atlantic Records. Lee purchased the West Indies Records Limited (WIRL) recording studios from Edward Seaga after fire had destroyed the pressing plant on the same site, , and renamed it Dynamic Sounds, soon having a new pressing facility built on the site. It soon became one of the best-equipped studios in the Caribbean, attracting both local and international recording artists, including Paul Simon and The Rolling Stones. Lee's productions included Boris Gardiner's Reggae Happening, Hopeton Lewis's Grooving Out on Life, and The Slickers' "Johnny Too Bad". Dynamic also acts as one of Jamaica's leading record distributors.
In 1990, Lee inaugurated what became an annual event, the Byron Lee Jamaica Carnival, held on Constant Spring Road, and attended by hundreds of thousands of people that united the "uptown" and "downtown" residents of Kingston, an event that Lee calls "the happiest moment in my life". Lee had performed with the Dragonaires at canivals around the Caribbean since the mid-1970s, and chose the location for the carnival to attract revellers from all of Jamaica's classes, stating "The biggest problem was that most Jamaicans said it wouldn't work, that it isn't a carnival country, but I persisted 'cause I believed in it. I wanted carnival to go to the public. You always had other carnivals that were held mostly indoor, where persons had to pay to get in. I went to the people and choose Half-Way Tree where uptown and downtown meet. That is where the route will remain". While in the early days of ska, Lee was credited in taking it from the ghettos and giving it appeal among Jamaica's "uptown" middle- and upper-classes, he has been credited with taking soca in the opposite direction, popularising a genre that had previously only been enjoyed in Jamaica among the upper classes, with the island's working class.
Lee missed the Jamaica Carnival in 2007 as he was receiving treatment for bladder cancer after having surgery in Florida, and no longer appears on stage with the Dragonaires, although he is still involved in the band's management, and was involved with the festival again in 2008. A concert was held in his honour on June 30 2007, to celebrate his 50 years in the music industry, with artists performing including fellow cancer-survivors Myrna Hague and Pluto Shervington. Proceeds went to the Jamaica Cancer Society.
Lee was awarded the Order of Distinction, Commander level on 15 October 2007, in recognition of his "contribution in the fields of Music and Entertainment both locally and internationally".