MotoGP championship leader Lorenzo had struggled throughout practice, and early in qualifying was languishing outside the top six.
But a set-up change transformed his performance and allowed him to run Pedrosa close for pole.
"It was really important, this qualifying, not only because we finished in second position, but also because we improved the feeling on entering the corner so much," Lorenzo said.
"We put some more weight on the rear and it improved the feeling. I was so happy to ride like on a normal track again. Here it was a complete nightmare."
Lorenzo now believes that victory at Indianapolis is possible, though he intimated that he might not risk everything for the win and could settle for solid points for his championship bid. The Yamaha rider currently leads Dani Pedrosa by 23 points.
"I'm very confident for tomorrow," said Lorenzo. "We'll try to fight for the win, but if it's not possible the podium will be perfect."
Meanwhile Pedrosa said he did not let the string of massive crashes in Indianapolis MotoGP qualifying unnerve him before going out to take position for the American race.
Casey Stoner, Ben Spies and Nicky Hayden all had very violent accidents on the way out of Turn 13. Stoner has been diagnosed with torn ligaments in his right ankle, while Hayden was knocked unconscious briefly and is now receiving checks.
"Today it was very tricky out there because the surface was very slippery. We were sliding all the way," said Pedrosa.
"Sometimes you'd feel like you had control of the slide and suddenly the bike would keep sliding. We could see many crashes, but it was important to keep cool and keep focused on riding.
"We did some good laps and I think the setting is quite good now. I hope to do quite well tomorrow."