Two years after winning the top prize with "Brokeback Mountain," he's back with an erotic spy thriller set against the backdrop of Japanese-occupied Shanghai during World War II. The movie, "Lust, Caution," originally was tagged as a Taiwanese film but was later designated as from Taiwan, China.
Taiwan said the change makes it appear as if the island is part of mainland China. (China and Taiwan split amid civil war in 1949, but Beijing still considers self-ruled Taiwan as its territory and has threatened to retake it by force.)
Lee called the change "unfortunate," but was at a loss to explain it.
"I don't really have much to say except that it has been changed from one to the other. If you can find out what's going on, please let me know," Lee told a news conference. "I just hope you enjoy the movie and let the movie speak for itself. You know where I come from."
The organizers said the country designation is decided by a movie's producers, and that they would change the listing on Lee's film if all the producers involved agreed.
In the film, an idealistic young acting troupe in Hong Kong driven by patriotic fervor drafts a naive plot to assassinate a Chinese official collaborating with the Japanese during World War II. Their star performer delves into the role of seductress as an escape from the emptiness of her father's abandonment and mother's death.
Her pursuit of a cruel, aloof man takes her from Hong Kong to Shanghai at the height of the Japanese occupation - and her deception becomes her reality.
"Only by pretending can she reach the other side, that true self," Lee said.
Lee, who was born and raised in Taiwan before moving to the United States in 1978, said hopping between two worlds as a filmmaker has molded his cinematic sense.
"Actually going to the States and making American movies and (then) going back helped me understand that the romanticized China that I grew up with being told about by my parents was somewhat different than what I see today," Lee said.
"Lust, Caution," which contains explicit sexuality, has been given an NC-17 rating in the United States, banning viewers under 17. The film also does not shrink from a graphic portrayal of violence.
Lee, who also made 2000's "Crouching Tiger, Hidden Dragon," said he hoped that NC-17 designation would not discourage audiences from seeing his latest film.
"We hope to send the message in the U.S. that NC-17 is a respectable category and that it's not pornography. It's just unsuitable for children," Lee said upon arrival at the Venice airport.
The movie is due out in the United States at the end of September.