Donald, 26, was at 10-under 134 at the halfway mark of the European Tour event.
Wilhem Schauman shot 67 for 135 and Christopher Hanell and Paul McGinley were at 137.
Donald plays most of his golf on the U.S. PGA Tour, where he won the Southern Farm Bureau Classic in 2002.
His 65 broke the course record at the Barseback Golf & Country Club.
"I am hitting the ball as well as I have been all year at the moment," Donald said. "Golf seems an easy game when you are hitting fairways, hitting greens and making putts and I got on a bit of a roll out there today."
Defending champion Adam Scott was at 1-under 143, tied for 33rd place.