Tseng, ranked No. 1 in the world among women golfers, is seeking her second LPGA Championship victory and her fourth major title. She won this event in 2008.
On a Locust Hill Country Club course softened by Thursday's rains, Tseng recorded a 36-hole total of 8-under 136. Pat Hurst was alone in second at 137 following a round of 67.
Morgan Pressel, Minea Blomqvist and Hee Young Park were tied for third at 138. All three shot a 69 Friday.
Paula Creamer, who will defend her U.S. Women's Open title next month in Colorado, was among those in a tie for sixth at 139. Defending champion Cristie Kerr was at 144 in a tie for 38th.
Tseng started on the back nine and got her round going with three straight birdies beginning at the 13th. She double bogeyed the par-4 18th, but came back with two birdies on the front side.
"I feel a little bit disappointed about my round today," Tseng said. "I hung in there, tried my best every shot. I didn't give any shot away, but I missed two very short putts. That's very disappointing."
Tseng, at age 22, would be the youngest player in LPGA Tour history with four major titles. Se Ri Pak, who is a member of the LPGA Hall of Fame, won four majors by age 24.