"North Korea must cast off a course of confrontation and conflict and take the path of peace and prosperity," Lee said in a Memorial Day speech.
"For this we will continue our sincere and consistent efforts with patience," he told a solemn ceremony at a national cemetery in Seoul after memorial sirens wailed for the war dead, followed by a salute of 21 guns.
The ceremony came amid high cross-border tensions after North Korea threatened retaliation after media outlets in Seoul revealed South Korean troops had been using its rulers as rifle-range targets.
Several training centres for South Korean marines, ground troops and army reservists had been using the pictures. They have since been ordered to stop and use normal targets instead.
The North's military on Friday called for an apology and stern punishment for those involved, saying it would otherwise escalate "retaliatory military actions".
Cross-border relations have been icy for more than a year, since the South accused the North of sinking one of its warships and imposed trade sanctions.
The North denies involvement in the March 2010 sinking. But it shelled a South Korean border island last November, killing four people including two civilians.
In an abrupt change of tack in January, the North began calling for peace and dialogue. But last week it announced it would no longer deal with Lee's conservative government.
Copyright AFP (Agence France-Presse), 2011