Stewart Ginn, Bob Gilder, Vicente Fernandez, Dave Eichelberger and Fred Gibson share third place at 6-under-par 66.
Rachels, whose best finish at this event is a tie for seventh in 2002, had a solid front nine with three birdies before catching fire on the back side of the Ridge and Valley layout at Egypt Valley.
The 53-year-old made his move with back-to-back birdies starting at the par-3 12th and he added a birdie at the par-4 15th to jump to 6 under.
At the par-3 16th, Rachels knocked his tee shot to 5 feet and drained the birdie. He then chipped his third shot from just off the green at the par-5 17th within a foot of the cup to make it three in a row and grab the outright lead at minus-8.
'I putted very nicely today,' said Rachels, who missed last year's event with a shoulder injury. 'Every good round is a plus for me coming back from a rotator cuff injury.'
Torrance, a European Tour veteran who made his debut on the Champions Tour in 2003, picked up his first birdie of the day at the par-5 third. He then birdied the seventh and the ninth and kept the run going with a birdie at the par-4 10th.
The Scot, who captained the Europeans in the 2002 Ryder Cup, hit his tee shot to 10 feet for a birdie at the par-3 12th and dropped his third shot inside 3 feet for a birdie at the par-5 13th.
Torrance then ran home an 18-foot putt for a birdie at the 14th and parred his way in to finish one shot off the lead.
'The greens are beautiful here,' said Torrance. 'Perfect conditions today.'
Des Smyth and Jim Thorpe tied for eighth place at 5-under-par 67.
Ed Fiori, Tom Purtzer, Walter Hall, John Harris, Leonard Thompson and Mark Johnson were one shot further back at 4-under-par 68.
Hale Irwin, who won the rain-plagued Senior PGA Championship on Monday at Valhalla, tallied three birdies and two bogeys to finish in a group at 1-under-par 71.
Defending champion Doug Tewell struggled in the opening round with a 5-over-par 77.