The 52-year-old Scot finished with a 5-under 67, missing a 6-foot par putt on the par-5 18th to fall to 8-under 135. He opened with a 68 on Friday at par-71 Poppy Hills.
''I lost my concentration on the back nine,'' Montgomerie said. ''I was out there a long time and it was a stupid bogey at the last hole. I just have to concentrate tomorrow.''
Second behind Jeff Maggert in the Charles Schwab Cup points race, Montgomerie is coming off a victory two weeks ago in England in a European Senior Tour event. All three of his Champions Tour victories have come in majors, the last a successful title defense in the Senior PGA Championship in May.
Olin Browne has second after a 65 at Poppy Hills.
''I hit a couple of good shots on the first hole and made birdie and that kind of opened up the day,'' Browne said.
Mexico's Esteban Toledo was third at 6 under after a 66 at Pebble Beach.
''I've hitting the ball really, really well,'' Toledo said. ''Does it surprise me? No, not really. But shooting a 66 here at Pebble Beach in the morning, it doesn't get better than that.''
Tom Watson was 3 under after a 65 at Pebble Beach. The 66-year-old Watson birdied the first four holes and six of the first seven. He added birdies on 14 and 15, but dropped a stroke on 16. Watson won the 1982 U.S. Open at Pebble Beach and took the PGA Tour's Bing Crosby event at the course in 1977 and 1978.
First-round leaders Tom Byrum and Sweden's Jesper Parnevik struggled. Byrum had a 73 at Poppy Hills to fall into a tie for ninth at 3 under, and Parnevik was tied for 15th at 2 under after a 75 at Pebble Beach.
Maggert was even par after a 69 at Pebble Beach. He leads the tour with four victories, winning three of his last six starts.