Jose Maria Olazabal, who has never won this event, posted a 67 to finish in a tie for third at 13-under-par 131 along with fellow Spaniard Santiago Luna, Simon Khan of England and Ireland's Peter Lawrie.
Casey, who earned his second career victory on the European Tour at the ANZ Championship in February, put together a solid round amid the friendly confines of Golf Costa Adeje.
The Englishman played the back side first and picked up four birdies over his first nine holes to make the turn at 12-under. Casey added a birdie at the first and then birdied the sixth to grab a share of the lead at minus-14.
The 25-year-old found trouble on the green at the par-3 seventh en route to a bogey but responded well over the closing holes. Casey two-putted for birdie at the par-5 eighth and drained a 15-foot putt at the ninth to enter the clubhouse in the lead.
'I've not usually performed well after a break before, but I've been playing a lot at home in Arizona. It's kept me sharp,' said Casey. 'It was almost a relief when last season ended because I was tired, but then I played with Justin Rose in the World Cup and finished third and possibly that was the turning point.'
Casey was soon joined by fellow countryman Tunnicliff, who completed a stellar round of his own moments later. Tunnicliff started on the front nine and birdied four of his first six holes until a bogey at the seventh.
Tunnicliff countered with back-to-back birdies from the eighth and reached 14- under with a birdie at the 11th. The 34-year-old dropped his second shot of the round with a bogey at the 12th but bounced right back with a birdie at the following hole.
He coasted at even par down the stretch until a birdie at the last granted him a share of the halfway lead.
'I've never been 15-under par after two rounds before,' said Tunnicliff, who earned his first career victory at last year's Great North Open. 'But I feel comfortable with my game and I'm looking forward to the weekend.'
Olazabal started on the back nine with a burst. The two-time Masters champion birdied five in a row from the 11th before a bogey at the 16th. Olazabal picked up two birdies and a bogey the rest of the way to finish two shots back.
'The way this course is playing, anyone who plays well from tee to green is going to have chances to make birdie and that is what it will be all about this weekend,' said Olazabal. 'The guy who makes the most putts will win.'
Marten Olander, who held a share of the opening-round lead with Charl Schwartzel, carded a 69 to finish three shots off the pace at 12-under-par 132. Olander was joined by Andrew Marshall, Paul McGinley, Julien Clement, Nicolas Vanhootegem, Soren Hansen, Kenneth Ferrie and Mikko Ilonen.
Schwartzel was one shot further back in a group at 11-under-par 133.
Defending champion Sergio Garcia shot a 5-under 67 to finish in a tie for 45th at 8-under-par 136.
A total of 82 players survived the 36-hole cut which fell at 6-under par, a new low on the European Tour.
Three-time champion Seve Ballesteros came close to playing the weekend but ultimately fell short with a round of 71. Ballesteros finished one shot off the cut line at 5-under-par 139.