Speaking at a National Day dinner for Tanjong Pagar GRC and Tiong Bahru residents, he said Singapore will fold up if there are no original citizens left to form the majority.
Mr Lee also said that migrants are needed as a temporary solution. The trend of declining birth rates must also be reversed.
If there are no new citizens, new PRs will settle Singapore's social ethos, social spirit and social norms, he said.
According to The Straits Times, Mr Lee said Singaporeans not marrying and not having children has become a "national problem" even though an individual's lifestyle and marital plans are personal decisions.
In his speech, Mr Lee also spelt out current demographic trends.
The Chinese had the lowest fertility rate in 2011 at 1.08.
Successive generations of the largest ethnic group in Singapore will halve in size in the next 18 to 20 years if this continues.
Indians had a fertility rate of 1.09 while Malays had a fertility rate of 1.64.
All three ethnic groups have fertility rates below the replacement level of 2.1.
Mr Lee also noted that around 44 per cent of Singaporean men and 31 per cent of women aged between 30 and 34 are single.
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