McDowell had six birdies and two bogeys in the second round that gave him a 36-hole total of 7-under 135. He is two strokes clear of Gareth Maybin, whose 68 Friday left him at 5-under.
Niclas Fasth had the round of the day with a 5-under 66, jumping from a tie for 41st to third, four shots behind McDowell. Miguel Angel Jimenez (70 Friday) and Gary Boyd (69) are tied for fourth at 2-under 140.
First-round leader Pablo Larrazabal faltered to a 6-over 77 and is in a tie for 19th.
McDowell had two birdies and two bogeys on the front side Friday but moved up behind three birdies in the 11-14 span and went to 4-under with another at No. 17.
"I didn't play that well on the front nine, it was rather scrappy, but the back nine was good. I gave myself birdie chances and positioned the ball well," McDowell stated. "Level par is a good job at Valderrama. I will just keep doing what I'm doing for the next couple of days."
Celebrity Breakups and divorces of 2014 [PHOTOS]