Daly-Donofrio stands at 17-under-par 199. That total tied the 54-hole scoring mark set by Carin Koch in 2002.
Sophie Gustafson posted a 7-under 65 to move into second place at 14-under-par 202. Candie Kung and Women's British Open champion Karen Stupples share third place at 13-under-par 203 after matching rounds of 64. Overnight leader Laura Diaz is one stroke further back at minus-12 after a 1-under 71.
Daly-Donofrio dropped in a birdie putt at the second to get to minus-10 and move within one shot of Diaz. She kept pace with Diaz as they each birdied the par-5 fourth.
Daly-Donofrio, whose lone win came at the 2001 Betsy King Classic, joined the 29-year-old Diaz in the lead with a birdie at No. 5 at Magnolia Grove Crossings Course.
The 35-year-old Daly-Donofrio made it three in a row as she sank a 3-foot birdie putt at six. She moved two clear of Diaz when she kicked in a 4-foot birdie putt at the seventh.
Diaz fell three back with a bogey at the eighth. Daly-Donofrio dropped her second shot with 3 feet of the cup at the 10th to setup her sixth birdie of the day. After she kicked that in, Daly-Donofrio was two strokes clear of Gustafson, who was making a run.
After Gustafson got within one, Daly-Donofrio rolled in a 4-foot birdie putt at the 13th to regain a two-shot cushion. Daly-Donofrio posted four straight pars before draining a 15-foot birdie put from the fringe at 18 to take a lead into the final round for the first time in her career.
'It was great. It was just a really fun round,' said Daly-Donofrio. 'I just hope everything keeps rolling this way.'
The key to the round for Daly-Donofrio was her putter. She drained 13 one-putts in 18 holes.
'I started out great,' Daly-Donofrio said. 'I had seven one-putts in the first seven holes. Even the putts I didn't make I almost made. The greens are a little slower here this week than they have been in the past, and I feel like I can putt them a little bit better.'
Daly-Donofrio is in the field this week due to a rule change in the eligibility for the event. Prior to this year, the event was limited to Hall of Famers and winners from the current season and two prior years. Players from the current season and three prior years are now eligible.
'With the rule change to make the field bigger, I got here with my win in 2001 so I feel lucky to be here,' said Daly-Donofrio. 'Anything I do this week is a bonus. Of course I'd love to win. I've never played with a lead before so I am going to just continue to be aggressive.'
Gustafson flew up the leaderboard and into contention as she ran off four consecutive birdies from the third. The got her to 11 under.
After four pars, the Swede sank a 7-foot birdie putt at 11. Gustafson came right back with a 45-foot birdie putt at the next. She got to minus-14 when she rolled in a 6-footer for birdie at 13. The four-time winner on the LPGA Tour closed with five pars.
'My ball striking is the best part of my game right now,' said Gustafson. 'I didn't have it early in the year, but it's finally coming back.'
Lorena Ochoa stands alone in sixth place at 9-under-par 207. Hee-Won Han, Lorie Kane, Patricia Meunier-Lebouc and Grace Park are one stroke further back at minus-8.