Spectral lag, which is defined as the difference in time of arrival of high- and low-energy photons, is a common feature in gamma-ray bursts (GRBs). Previous investigations have shown a correlation between this lag and the isotropic peak luminosity for long duration bursts. However, most of the previous investigations used lags extracted in the observer frame only. In this work (based on a sample of 43 Swift long GRBs with known redshifts), we present an analysis of the lag–luminosity relation in the GRB source frame. Our analysis indicates a higher degree of correlation −0.82 ± 0.05 (chance probability of ∼5.5 × 10−5) between the spectral lag and the isotropic peak luminosity, Liso, with a best-fitting power-law index of −1.2 ± 0.2, such that Liso ∝ lag−1.2. In addition, there is an anticorrelation between the source-frame spectral lag and the source-frame peak energy of the burst spectrum, Epk(1 + z).