"While I never intentionally acted in an insensitive way, with 40 years of hindsight, I have come to realize that was insensitive and have come to regret that," the Republican governor told The Tennessean.
A spokeswoman for Lee confirmed on Thursday that Auburn's 1980 yearbook includes a photo of the governor and another man in Confederate uniforms.
Lee was 17 when joined the university's Kappa Alpha fraternity. The fraternity ended the tradition in 1992, a school spokesman said.
His office declined to provide any additional comment on Thursday.
The Associated Press contributed to this report.