Recording career
In 1942, Lee had her first top ten hit, "Somebody Else Is Taking My Place", followed in 1943 by "Why Don't You Do Right?", which sold more than one million copies and made her famous. She sang with Goodman's orchestra in two 1943 films, Stage Door Canteen and The Powers Girl.

In 1944, Lee drifted back to songwriting and occasional recording sessions for Capitol Records, for which she recorded a long string of hits, many of them with lyrics and music by Lee and Barbour, including "I Don't Know Enough About You" and "It's a Good Day". Her recording of "Golden Earrings", the title song of a 1947 movie, was a hit throughout 1947–48. "Mañana", by Lee and Barbour, was her eleventh solo hit recording, and remained on the charts for 21 weeks, including nine at the top position. The song sold more than a million copies, and earned the Top Disc Jockey Record of the Year award from Billboard magazine. From 1946 to 1949, Lee also recorded for Capitol's library of electrical transcriptions for radio stations. An advertisement for Capitol Transcriptions in a trade magazine noted that the transcriptions included "special voice introductions by Peggy".

In 1948, Lee joined vocalists Perry Como and Jo Stafford as a host of the NBC Radio musical program The Chesterfield Supper Club. She was a regular on The Jimmy Durante Show and appeared frequently on Bing Crosby's radio shows during the late 1940s and early 1950s.

Her relationship with Capitol spanned almost three decades aside from a brief detour (1952–1956) at Decca. For that label, she recorded Black Coffee and had hit singles such as "Lover" and "Mister Wonderful".

In 1958, she recorded her own version of "Fever" by Little Willie John, written by Eddie Cooley and Otis Blackwell. Lee created a new arrangement for the song, and added lyrics ("Romeo loved Juliet", "Captain Smith and Pocahontas").
Her version of "Fever" was a hit and was nominated in three categories at the 1st Annual Grammy Awards in 1959,