Gustafson made nine birdies and parred the other nine holes on the Drottningholm course near the Royal castle. Sorenstam, playing in her native Stockholm for the first time since 1999, shot a 67 after 68s the first two days.
Gustafson, a Swede who won the Irish Open in June, was at 15-under 201 and could have had an even better score.
'I had three other pretty good birdie chances,' she said.
Vibeke Stensrud of Norway was third at 205 after a 66. Laura Davies of England shared fourth at 206 with Becky Morgan of Wales and Silvia Cavalleri, the Italian LPGA player who led after two rounds.
Sorenstam was tied for the lead with Gustafson after 14 holes. But the world's top female player sent a shot past the green at No. 15, chipped back and two-putted for a bogey.
'Naturally, you want to lead the golf tournament, but Sophie really played well today,' said Sorenstam, who hit 16 greens Saturday. 'But tomorrow it really counts and I'm in a good position. I think I'll need a 65 to win and hopefully I'll shoot lower than today.'
Sorenstam, who completed a career Grand Slam by winning the British Open last week, is looking forward to playing with Gustafson, who also plays on the LPGA Tour.
'It's going to be exciting to play with her,' Sorenstam said. 'But it's not only us. I think those behind us will play aggressively.'
Gustafson, a big hitter, started the day at 6 under and birdied five holes on the front nine. On the back, she finished with four straight birdies.
In the last three years, when the tournament was called the Compaq Open, Gustafson finished second, third, second. Last year, Sorenstam beat her on a course in southern Sweden.
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