The 50-year-old, competing in his first Senior Open, recorded nine birdies and saved par from 15 feet at the last for his record round.
Pooley leads Walter Hall (72) and Tom Watson (69) by three strokes, at 9-under. Watson hit all but three fairways and three greens in round three, but was plagued by a balky putter he used 31 times.
'I'm going to watch that buttery putting stroke of Don Pooley's tomorrow and see if something can rub off on my putting stroke,' said Watson, who will play in the final twosome Sunday.
Pooley, a two-time PGA Tour winner, joins Johnny Miller (1973 at Oakmont), Jack Nicklaus and Tom Weiskopf (1980 at Baltusrol), and Helen Alfredsson (1994 at Indianwood G & CC) as the only players in USGA history to shoot 63 in an Open event.
His 8-under performance also ties the USGA Open record in relation to par. Millers and Alfredssons 63s came on par-71 courses. Orville Moody shot 8-under 64 in the third round of the 1989 U.S. Senior Open at the par-72 Laurel Valley G.C.
I have not won that much in my career and to win a major on the Senior Tour would be huge, Pooley said.
Pooley barely made it into this weeks field. He was one of 116 players battling for five qualifying spots, and birdied the final hole to join a playoff. He then birdied the first extra hole to punch his ticket to the Caves Valley Golf Club outside of Baltimore, Md.
Pooley started the day six strokes back of overnight leader Hall, who extended his advantage with three straight birdies out of the gate Saturday.
Watson stayed in stride with birdies on the first three holes, as well.
Hall made his first mistake of the day by coming up woefully short of the green on the par-5 seventh and making bogey. He dropped another shot at the ninth, and again carded a 6 at the par-5 13th.
After the torrid start, Hall notched only one birdie over his final 15 holes. He made a 3 at the par-4 16th, but gave it right back with a bogeys at 17 and 18.
Pooley, meanwhile, turned in 5-under 31, and birdied the tenth ' his fourth birdie in a row ' to move to 7-under. Playing in his first full season on tour, Pooley missed a two-footer for birdie at 14, but came back with a short putt to tie for the lead at 16. He then rolled home a 20-footer for his ninth birdie of the day at the uphill 464-yard, par-4 17th.
Needing a par to earn a share of the USGA record, he drove into the right fairway bunker at the 455-yard, par-4 18th. He played his second shot short of the green. But with a bunker protecting the flag, Pooley could get his third shot no closer than 15 feet past the hole.
Faced with a hard breaking left-to-righter, he snaked in the save.
Making putts like that on the last green - with all those people watching - was a lot of fun, he said.
Pooley will try and become the first player since Graham Marsh, in 1997, to successfully convert a 54-hole lead into victory at this event.
Ive got a good game plan, and Im going to stick to it ' adjust it if necessary tomorrow. But Im going to stick to the plan as of now, Pooley said.
Full-field scores from the U.S. Senior Open