Donald's 4-under 66 Friday was his 10th straight Nelson round in the 60s and put him at 7-under 133 through two rounds, a stroke ahead of defending champion Brett Wetterich (68), Fredrik Jacobson (67) and first-round leader Sean O'Hair (69).
It's the first time Donald has led at the end of any round at the Nelson, where 16 of his 20 career rounds over six tournaments have been under par.
'Yeah, I suppose it's a course I just enjoy,' Donald said. 'You don't have to overpower it, you don't have to be ultra-long to be successful. It's more about placing it. I have good thoughts and good feelings about this place when I play here, and it shows.'
Kent Jones (66) and Scott Verplank (68) were two strokes back, and Vijay Singh (67) was in a group of five players at 4 under.
This is the first time the tournament has been played without Byron Nelson, the champion golfer known as 'Lord Byron' and in 1968 the first to have a PGA Tour event named after him. He died Sept. 26 at age 94.
During the third round Saturday afternoon, play will stop for a moment of silence in honor of Nelson. There will also be a flyover by a squadron of fighter jets.
Donald took over sole possession of the lead with a 43-foot chip from the edge of the green at the 196-yard 17th. That was a hole after he missed his only fairway and had to settle for par at the 554-yard 16th, the easiest at the TPC Four Seasons.
Wetterich's bogey-free round came at Cottonwood Valley, the course across the street that hosted its final Nelson rounds Friday. The tournament is returning to a one-course format next year after a multimillion-dollar design at the TPC.
This is the first time in three years that Wetterich wasn't tied for the lead after the second round. He had a stretch of 10 straight pars between his only birdies at Nos. 2 and 13.
'It was slow, but at the same time, I didn't feel like I was playing that bad,' Wetterich said. 'I'm happy where I'm at.'
Donald, who has four top-10 finishes this season, also holed a 25-foot chip for birdie at the 426-yard 12th hole.
'With the greens being a little inconsistent, it's easier to not put at all if possible,' Luke said. 'Two chip-ins obviously on the back nine kept my momentum going.'
With the tournament being played a month earlier than usual, many of the TPC greens are in poor shape with patches of dead grass after attempts to revive it didn't work.
Donald's only bogey came at the 409-yard 14th when he missed the green and couldn't convert a 5-foot par putt.
That was about the same time O'Hair's troubles started a group behind, when he missed the green at the 183-yard 13th and pushed a 6-foot par putt past the hole.
O'Hair was deep in the trees after his wayward tee shot at 14th and punched back into the fairway before a nice par save. After a pitch shot to 20 feet, his putt looked like it was about to stop rolling, then it took one more turn and dropped into the cup.
'I guessed right, and luckily it was just hard enough to go in,' O'Hair said. 'That saved my round.'
Still, O'Hair missed the fairway again at No. 15 and had another bogey.
O'Hair started his round with an approach shot to 5 feet for birdie, but gave the stroke right back at No. 2 when his tee shot at the 192-yard hole was way left of the hole in the rough. He made the turn at 8-under with a two-stroke lead after chipping in from 26 feet for eagle 3 at the 533-yard seventh and making a 10-foot birdie at No. 9.
The ending didn't discourage O'Hair, who has four consecutive top-15 finishes.
'I'm tuned in,' said O'Hair, a one-time PGA Tour winner whose breakthrough was a runner-up Nelson finish in 2005. 'My game, the way I feel and everything, I'm liking how I feel.'
Seven of the last eight Nelson winners played their first rounds at Cottonwood Valley, like O'Hair did this year.
Cottonwood Valley was first used in 1994 on an emergency basis because of severe rains, but the following year became a regular part of the Nelson for the first two rounds.
Tiger Woods played his last Nelson round there in 2005, when his record streak of 142 consecutive cuts made ended with a missed putt at No. 18. It is also where Arron Oberholser shot a tournament-record 60 last year, missing a chance for 59 when his 15-foot birdie attempt on the closing hole curled a foot short of the cup.
Phil Mickelson (139) and Singh, the only top-10 golfers in the world ranking playing this week, were in the same group at Cottonwood Valley on Friday.
No. 4 Mickelson, in his first tournament since the Masters and with Butch Harmon as his instructor, had his only three bogeys on the final seven holes of a round of 70. His only three first-round bogeys at TPC came on the last four holes.
'I played OK, but I missed five putts inside six feet,' Mickelson said. 'That's what hurt.'
That included the 435-yard closing hole, where Mickelson drove into the right rough, hit his approach into a greenside bunker and then missed a par-saving 4-foot putt.
Seventh-ranked Singh had birdies on four of the last seven holes -- the same stretch Mickelson struggled.
The best round Friday was by SMU golfer Colt Knost (64), the first amateur since Justin Leonard in 1993 to make the cut at the Nelson. He was at 138. ... The cut was 1-over 141, with 73 players advancing to the weekend. Among those missing was Nick Watney (143), coming off his first PGA TOUR victory at New Orleans last week.