South Korea's Lee Dong-keun pushed four-time All England winner Lee all the way but the Malaysian superstar eventually came out on top 21-6, 13-21, 21-18 and will face six-time champion Lin on Friday in the latest chapter in their storied rivalry.
"I think I was better in this second-round match and I hope I get better tomorrow in the quarter-final," Lee said after his match on Thursday.
"I've never lost against this opponent (Lee Dong-keun). The first game I won quite easy and in the second game he got more confident and beat me."
China's Lin, a two-time Olympic gold medallist, reached the last eight with a 21-13, 23-21 win against Taiwan's Wang Tzu-wei.
In a major upset, China's Huang Yuxiang beat third seed Kidambi Srikanth of India 21-11, 15-21, 22-20.
In the women's draw, Spain's Carolina Marin took another step towards repeating her 2015 title win with a 21-13, 21-17 victory over Japan's Saena Kawakami.
"I feel really happy because my performance today was really good," said the Olympic champion. "I'm also happy with how I'm playing and how I managed the game."
Marin, who is fifth in the world rankings, will continue her quest for a second All England title in the quarter-finals against Akane Yamaguchi of Japan.
Fourth seed PV Sindhu was taken to a third set against Thailand's Nitchaon Jindapol but held her nerve to come out on top 21-13, 13-21, 21-18.