Lee had a 30 on the front nine of the Kuala Lumpur Golf and Country Club course and, despite her first bogey of the tournament, sits in first place at 13-under 129.
Lexi Thompson, who was 6-under on one five-hole stretch, shot an 8-under 63 and moved into second place at 12-under for 35 holes. Feng Shanshan, coming off a win at last week's LPGA tournament in Beijing, is in third at 10-under after turning in a 65.
I.K. Kim, with a 66, and Paula Creamer, with a 67, are tied for fourth at 9-under 133. Amy Yang fired a 9-under 62 -- a round that included 10 birdies -- in jumping into a tie for sixth at 8-under 134.
Lee's front-nine 30 pushed her lead to three and she added a chip-in birdie at 11 and a birdie 13 before a bogey at the par-5 16th. She was in a green-side bunker after her third shot and was unable to get up and down to save par.
Thompson had three birdies and a bogey in the first six holes but began a lead-threatening run with a birdie at 12. She had another birdie at 13 before holing a 127-yard wedge on the par-4 14th for eagle. Birdies at 15 and 16 pulled her within one stroke of Lee.
2014: The Year in Music [PHOTOS]