Irwin finished 36 holes at 16-under-par 128, one shot off Don Pooley's tournament record set last year.
Overnight leader Brad Bryant only managed a 4-under 68 on Saturday and is tied for second place with Tom Kite, who posted an 8-under 64. The pair is knotted at 13-under-par 131.
Defending champion Loren Roberts shot a 5-under 67 and shares fourth place with Jim Thorpe, who torched Hualalai Golf Club to the tune of a 9-under-par 63. Roberts and Thorpe are tied at minus-12.
Irwin parred his first three holes, but caught fire with back-to-back birdies at four and five. He ran home a 20-footer for birdie at the sixth and tallied another at seven to polish off four consecutive birdies.
Irwin sank a 20-foot birdie putt at the ninth to move to 11 under par for the championship. He moved into a tie for the lead at with Thorpe and Kite after a 7-foot birdie putt at the 10th.
At the par-4 13th, Irwin was one down to Kite when he knocked a pitching wedge 14 feet short of the flagstick. He converted the birdie putt to keep the pace with Kite.
Irwin reached the green in two at the par-5 14th and two-putted for a birdie and the lead. His 7-iron approach to the 15th stopped inches from the hole to set up a tap-in birdie.
The flat stick was really working for Irwin and on the 16th, he drained an 18-footer for birdie. Irwin was 10 under par and admitted thinking about matching his age.
'I told Loren after 16,' said Irwin, acknowledging that he thought about tying his age. 'I got off to such a good start on the front nine so I thought, why not?'
The first roadblock came at the par-3 17th as his tee ball found a greenside bunker. He blasted out to 6 feet and holed the clutch par save.
At the closing hole, Irwin found the fairway off the tee, then played his approach 10 feet short of the cup. Irwin's chance to match his age blew up when he failed to hit his putt hard enough. He tapped in for par and the 36- hole lead.
'I felt like I was playing well yesterday,' said Irwin. 'I just tried so hard on that last hole. I got stuck on the line and forgot to hit it into the grain.'
When Irwin did not win last year, it marked the first season on the Champions Tour that he failed to visit the winner's circle. He acknowledged that his back was an issue, but he declared he was ready for the 2007 campaign.
'Last year, we put that year behind me,' said Irwin. 'Get started on a better year.'
Kite mixed seven birdies and an eagle in his round until the 17th. He missed a 4-footer for par that would have put him two shots behind Irwin with one round to go.
'It was a good day that could have been a little bit better,' admitted Kite.
Bryant was in great shape early on with three birdies in his first seven holes. He missed the green at the par-3 eighth and walked off with a bogey. Bryant made only one birdie the rest of the way.
Allen Doyle (67), Jerry Pate (67) and Ben Crenshaw (68) are knotted in sixth place at minus-11. Morris Hatalsky carded a 6-under 66 and is alone in ninth place at 10-under-par 134.