The 23-year-old Phatlum, winless in five LPGA seasons, followed her opening 8-under 64 with a 66 for a tournament-record 14-under 130 total at rain-softened Columbia Edgewater.
Norway's Suzann Pettersen, the 2011 tournament winner at Pumpkin Ridge, was a stroke back at 13 under after a bogey-free 63. Germany's Sandra Gal was 12 under after her second straight 66, and countrywoman Caroline Masson was another stroke behind after a 64.
A 72-hole event for the time, the tournament is back at Columbia Edgewater after four years at Pumpkin Ridge. Columbia Edgewater also was the tournament site from 1990-2008.
Phatlum cooled just slightly from her opening round, when she made 10 birdies.
''I'm playing kind of good today, but my putter wasn't that hot. I didn't make enough birdies on the front nine. But then I started getting on a roll and I made more birdies on the back,'' Phatlum said.
Phatlum, leading for the first time after 36 holes on the LPGA, is looking forward to playing in the final group Saturday with Pettersen.
''It's going to be a lot of pressure, but I'm going to keep it smooth and simple. Just not to feel a lot of pressure, and just try and play my game,'' Phatlum said.
Pettersen played Friday with Spain's Beatriz Recari, who birdied her first five holes on the way to a 66 that left her at 7 under.
''Today was a great round on the greens. I kind of fed off Beatriz's start. It was kind of nice to get everyone going early. It was one of my better putting performances,'' said Pettersen, whose 63 was her low score of the year.
Pettersen has three straight top-10 finishes. Two weeks ago, she went 1-1-1 in helping Europe beat the United States in the Solheim Cup.
''I've been feeling good. I'm glad it's only two more days. As long as you've got adrenaline, it's not a problem to keep going,'' Pettersen said.
Pettersen thinks the scores will remain low during the final two rounds.
''I think it's going to be a birdie-fest,'' she said.
Gal has only one bogey through two rounds.
''My game has been getting there the last month or two. I just haven't been making any putts. When that kind of comes together it just kind of all accumulates,'' said Gal, whose lone LPGA win came in the 2011 Kia Classic.
''I actually hit it awful,'' Kere said. ''I know you're not expecting somebody that's 10 under to say that, but I didn't hit it very well. Scary to think how low I can go with the way I'm putting if I can actually hit it well the next two days.''