Kevin Stadler and Jeff Freeman share second place at minus-7. Kyle Reifers, who won the Chattanooga Classic earlier this year, posted a 6-under-par 65. He was joined in fourth place by Jarrod Lyle, Jamie Broce and Jason Allred.
Dunlap flew out of the gate at Hillcrest Country Club as he birdied the first three holes. He gave one stroke back with a bogey on the fourth. After three pars, he started a new birdie string.
The 42-year-old dropped in a birdie on the par-3 eighth. Dunlap made it two straight with a birdie on nine. He was not done either. Birdies on 10 and 11 moved Dunlap to minus-6.
Dunlap, whose lone tour win came at the 2004 Mark Christopher Charity Classic, collected another birdie on the par-3 13th. After tripping to a bogey on 14, Dunlap then birdied the 15th to join Stadler at minus-7.
Dunlap birdied the par-3 17th to claim the overnight lead.
'I hit it close a lot. I probably hit more than my fair share of fairways which, on this golf course, is so tough to do,' stated Dunlap. 'Even from the rough you can hack it up on the green, but you're never going to hit it close to the hole. You're just going to par it to death. To make that many birdies, you've got to get the ball in the fairway, which is no easy task.'
Currently 91st on the money list, Dunlap needs a win and another high finish in the final six events to earn his PGA TOUR card for next season.
Stadler, the Xerox Classic winner, played the back nine in 2-under with three birdies and a bogey. He dropped another stroke on the first, before catching fire.
The 26-year-old birdied two and three, then again collected back-to-back birdies from the fifth to move to minus-5. Stadler dropped in a birdie on eight and closed with a birdie on nine to end at minus-7.
'I tend to hit it pretty well, but the putter tends to be the difference between a 64 and a 68 or 69,' admitted Stadler, who is 18th on the money list. 'I'm still not real comfortable with it, but it helps to see a few go in.'
Freeman was hot early with three birdies on his first four holes. After a bogey on No. 14, Freeman birdied 15 and 16 to get to 4-under.
He dropped another stroke on the first, but birdied two and eagled three to move to minus-6. Freeman then birdied the fourth to tie Stadler in second. Freeman parred his final five holes to end there.
Rick Price, Steven Alker, Andrew Buckle and Tom Carter share eighth place at 5-under-par 66. Ken Duke, who is No. 2 on the Nationwide Tour money list, is one of 12 players at minus-4.