Wendy Ward, who at one point held the lead on Saturday, is alone in third place at 10-under-par, followed by Pat Hurst, who posted a 1-under 71 and is alone in fourth at minus-9.
Jones, who has held at least a share of the lead after the first two rounds and was one stroke up after Friday's second round, never got anything going on the front nine at the Mount Vintage Plantation Course. She two-putted nearly every hole as Ward made a move up the leaderboard.
Ward took the lead with a tough birdie at the fourth and extended the advantage to two shots with a birdie at the par-5 sixth. Jones looked ready to falter but holed a clutch par save at the eighth to keep within striking distance of first place.
'That kept me in there,' said Jones, referring to her par-saving putt at No. 8.
Ward bogeyed the eighth to fall into a tie with Diaz at 11-under par. Diaz flew up the leaderboard with four birdies and one bogey in her first 10 holes.
Once play headed to the back nine, Jones got her putting stroke in form. She went through the green at the 11th but sank the 25-footer for birdie to tie Ward and Diaz in first.
Neither Diaz nor Ward could make birdie at the par-5 12th, but Jones knocked her third shot to four feet to set up birdie and take the lead at 12-under par. Diaz made a mess of the 13th but drained an eight-foot par save to remain one shot behind Jones.
Ward bogeyed the 15th to fall down the leaderboard but Diaz, in the group ahead of Jones and Ward, nearly holed her chip for an eagle at the 16th. She settled for birdie and a share of the lead but Jones followed with an eight-foot birdie at 16 to re-take a one-shot lead.
Diaz drove into a bunker and had an impossible lie up against the lip of the trap at 17. She laid up short of the green and played a 9-iron 30 feet right of the hole. Diaz missed the par save and fell two back.
Jones parred out and is in good position for her first title since the Big Apple Classic in 2001.
'I don't feel like it has been two years since I won,' said the 43-year-old Jones who has 12 career LPGA Tour titles. 'I've played a lot of good golf since then.'
With Americans holding the top-four places on the leaderboard, it looks probable that the streak of winless Americans will end. Meg Mallon was the last American player to win on the LPGA Tour at the Canadian Women's Open in August of 2001.
'It'll be a matter of how aggressive everyone wants to be and how many birdies they're going to make,' said Diaz, who became the first American to win in 2002 when she titled at the Welch's/Circle K Championship for her first LPGA Tour victory.
Lorena Ochoa of Mexico had a piece of the lead Saturday but stammered on the second nine. She carded a 3-under 69 and is alone in fifth place at 8-under par.
Janice Moodie, the 2002 winner, is sixth at minus-seven while Wendy Doolan and Giulia Sergas share seventh at 6-under-par 210.