The world number 46 had eight birdies in a bogey-free round to finish on a 10-under total of 134.
The Korean leads Rikako Morita of Japan who held the lead after an eagle on the par-5 13th only to bogey three of the last five holes for a 68.
"My drives were good today, I was able to keep them on the fairway which was tough with this wind," Lee said.
"If I can keep driving and putting like this I feel good about my chances tomorrow."
Angela Stanford of the United States shot a 71 and was tied for third at four-under with Korea's Na Yeon Choi, France's Karine Icher and overnight co-leader Ayako Uehara of Japan.
British Open champion and overnight co-leader Jiyai Shin dropped to eighth after a 73 in a group on three-under that also includes world number one Yani Tseng of Taiwan, defending champion Momoko Ueda and American Stacy Lewis who leads the LPGA player of the year standings with three events remaining.
Lewis's nearest challenger is Inbee Park, who opened the LPGA Tour's Asian Swing with a victory in Malaysia and second last week in Taiwan, but she is nine off the lead after a 73.