Watson is trying to become the eighth player to win the Senior Open after previously winning the U.S. Open. He shot a 6-under 66 at the Whistling Straits course Friday for a 36-hole total of 136.
First-round leader Eduardo Romero stumbled to a 77 and was tied for 21st at 1-under 143.
Watson made eight birdies, including four in a row beginning at the 14th. He one-putted 10 greens.
There were 25 players under par at the 36-hole mark, but Jay Haas -- the leading money winner on the Champions tour -- was not among them. Haas was at even-par 144 after firing a 71 Friday.
Swim Week Miami Beach 2014 [PHOTOS]