The meeting, at the Hong Kong room of the Great Hall of the People in Beijing, came on the third day of Lam's annual duty visit to China, reports the South China Morning Post newspaper.
"The central government (of China) fully acknowledges the efforts made by you and the city's government," Li told Lam.
"The city's government must continue to make efforts in stopping violence and ending chaos in accordance with the law, and restore order.
"It must also study with urgency the deep-rooted conflicts and problems in Hong Kong's socio-economic development, and safeguard the city's long-term prosperity and stability," the premier added.
In response to Li, Lam admitted Hong Kong that had faced a very grim situation on the political, economic and social front over the past year.
The city has recorded a significant economic downturn over the first six months, she said, but attributed it to external factors, such as the ongoing US-China trade war.
"There would be a more significant downturn in the third quarter because of the internal social unrest," Lam added.
Lam is expected to meet President Xi Jinping at the Zhongnanhai leadership compound on Monday afternoon.
More than 6,000 people have been arrested in connection with the protests, which were triggered in June by the now-withdrawn extradition bill and have evolved into a wider, increasingly violent, anti-government campaign, said the South China Morning Post.
Coupled with the US-China trade war, the unrest has pushed the city into a recession.
The economy shrank 3.2 per cent in the third quarter, from the previous one, while GDP was down 2.9 per cent in the third quarter year on year, the biggest contraction in a decade.
After the pro-Beijing camp suffered a humiliating defeat at the district council elections last month, protests have been largely peaceful.
( With inputs from IANS )