In his Lunar New Year message sent to the media, Lee -- a father of four -- said growing Singaporean families was an "important priority" and that more local born babies were needed to maintain Singapore's national identity
"I fervently hope that this year will be a big Dragon year for babies... This is critical to preserve a Singapore core in our society," he said.
"We do not want to rely more and more heavily on immigration, nor do we want to see our population shrinking year by year."
The Year of the Dragon is regarded as the most auspicious to have a baby because it is the only mythical creature among the dozen animals that represent each year in the Chinese cosmic cycle.
Superstitious Chinese believe children born during the Year of the Dragon -- the symbol of ancient emperors -- will possess courage and wisdom and bring luck to the entire family.
Historic data shows spikes of more than 10 percent in the city-state's total births during the most recent dragon years, 2000 and 1988, even as numbers declined in the interim years.
Referencing official data which showed Singapore's total fertility rate (TFR) dropping "steadily" from 1.60 babies per female in 2000 to 1.20 in 2011, Lee said the downward trend was "especially true" for Chinese Singaporeans.
Statistics showed Chinese Singaporeans' TFR dived from 1.43 in 2000 to 1.08 in 2011, the lowest among the three predominant races in Singapore.
Although the overall TFR for 2011 was a slight improvement on a record low of 1.15 two years ago it was far below the 2.1 babies needed for the population to replenish itself naturally.
"I do not think we have reversed the long-term downward trend," Lee said.
Singapore currently has a population of 5.2 million, a quarter of whom are foreigners.