Latvala had dropped two minutes with a puncture on the rally's opening stage on Friday morning, but has since proved that he had the pace to fight for a second straight victory.
He was untouchable on the two runs through the 13 kilometres of Gallura in increasing darkness on Friday evening, winning the first by 10 seconds and the second by 5s.
That brought him up to fifth place overall, but one of those positions was gained when Mads Ostberg became the second M-Sport Ford driver of the day to crash out.
Ostberg had been running fourth, close behind Mikko Hirvonen and Thierry Neuville's battle for second, when he rolled early on SS8.
With team-mate Evgeny Novikov having crashed heavily on Friday morning when third, Neuville is now M-Sport's last podium hope.
The Belgian continues to pile pressure on Hirvonen, closing to within 3.1s of the second-placed Citroen at the end of leg one.
Ogier's lead over this battle is now up to 46.6s.
Dani Sordo has drifted half a minute away from the podium fight in fourth, with the flying Latvala now only 24.6s behind him.
Andreas Mikkelsen lost out to his Finnish team-mate's recovery charge and is sixth.
Robert Kubica lost a chunk of his WRC 2 lead when the one-minute gaps in start times for his class left him battling huge dust problems.
But he is still 1m10s ahead of new second-place man Abdulaziz Al-Kuwari and is up to 10th overall. Sepp Wiegand has retired with engine problems.