Lee, 53, fell unconscious five minutes after diving into the water around 25 metres deep at 6.05 a.m. and lost all contact, Yonhap news agency reported.
He was immediately rushed to a hospital in Mokpo, a south-western port city located near the site of the mishap, where he was pronounced dead on arrival.
Lee was a crew member of the South Korean Undine Marine Industries which is a private business specialising in offshore and subsea engineering as well as maritime rescue and salvage work.
The search effort was suspended briefly following his death, but the government rescue team proceeded with the operation as scheduled for the whole day.
South Korean Prime Minister Jung Hong-won has ordered the government rescue team to thoroughly check the health condition of the divers.
Last week, a 31-year-old civilian diver fell unconscious after diving four times before daybreak to set guideline ropes around the ship, while several other divers were treated at hyperbaric oxygen therapy centres.
The toll in the mishap rose to 259 Monday after 11 more bodies were recovered from passenger cabins on the third and fourth floors of the five-storey ship.
There have been no survivors reported since 174 people were saved April 16.
The passenger ship Sewol sank off the country's southwest coast April 16. The 476 passengers aboard the ill-fated vessel included 325 high school students and 24 teachers on their way for a class trip.