Morgan fired a five-under-par 67 at the Pelican Marsh Country Club to take a one-shot advantage at six-under-par over John Bland (69), Dana Quigley (70) and Mike McCullough (70). Jim Ahern is alone in fifth place at four-under after carding a 70.
George Archer tied the course record with an eight-under-par 64. The 61-year-old, who won last year's MasterCard Championship, was 13 shots lower in the second round than in the first.
'The golfing gods were smiling on me,' said Archer.
Thanks to six birdies and an eagle at the par-five 16th, Archer is tied with eight others at three-under-par. Included in that group are two-time 2001 winner Larry Nelson and 18-hole leader Jose Maria Canizares.
Nelson shot 69 on Saturday to climb into contention; while Canizares posted a one-over-par 73 to fall into a sixth-place tie.
Morgan, who won this event in 1998, began the day three shots back of Canizares, who is seeking his first Tour victory after four runner-up finishes. The 18-time Senior victor birdied three of his first seven holes on each nine. The lone blemish on his card came on the par-four 18th, courtesy a bogey.
'I didn't anticipate being in contention this early in the year,' said Morgan, who won all three tournaments last season where he held a piece of the lead with one round to play. 'I haven't had time to get my game in shape. That showed near the end of the round. But it's nice to be in contention.'
Click here for Full-Field scores from the ACE Group Classic!