Lee made a special speech to parliament following a public dispute with his younger brother and sister.
They accuse the prime minister of misusing his influence in the dispute over their late father’s house.
The dispute should be settled in court, said Workers’ Party secretary general Low Thia Khiang in parliament.
“This Lee family saga playing out on Facebook has become an ugly media circus. Settling this in court would enable everyone to put forward their sides of the story with evidence and with dignity,” Low said.
On June 14, the siblings posted a statement saying they “felt threatened” by Lee’s use of his position to “drive his personal agenda” since their father died in March 2015.
“Individuals who make less serious allegations that undermine the reputation and authority of the PM and cabinet ministers have been brought to task for libel. There is no reason why this time it should be different because it comes from the Lee family,” the opposition figure said.
“In fact the allegations are much more serious. Given the past track record, not doing so will risk the government giving the impression that it is afraid of what the Lee siblings might say or reveal.”
Low said the spat “blurred the line between the private and public” and called for that line to be re-established.
Lee and his father, founder of Singapore Lee Kuan Yew, have been known for suing critics and opponents for defamation.
The premier said “any other imaginable circumstance but this, I would surely sue”.
“But suing my own brother and sister in court would further besmirch my parents’ names,” Lee said, causing “more distraction and distress” to citizens.
“Therefore, fighting this out in court cannot be my preferred choice.”
The Lion City’s main opposition leader Low Thia Khiang said it suggested the government “was afraid of what the Lee siblings will say or reveal” in court.
The three siblings are in disputes over their father’s house, 38 Oxley Road, and whether it should be demolished in accordance with the final version of Lee’s will.
Lee Hsien Yang and Lee Wei Ling have repeatedly attacked their older brother on Facebook.
They accuse the premier of wanting to preserve the house for political gain.
Singapore Prime Minister Lee Hsien Loong. Picture credit: ACC