Funk stands at 10-under-par 132 and is one ahead of Raymond Floyd at Oak Hills Country Club.
Floyd carded a 5-under 66 to move into sole possession of second place.
Jay Haas, the defending champion and leading money winner on the Champions Tour, fired a 7-under 64 and is tied for third place with Keith Fergus (67) and Scott Simpson (68). The trio completed 36 holes at 8-under-par 134.
Funk was once again flawless on Saturday with four birdies and no bogeys.
He has spent most of his 2006 season competing on the PGA TOUR and in fact, has only played twice on the Champions Tour prior to this week. He finished tied for 11th both at the U.S. Senior Open and the Ford Senior Players Championship.
Jim Thorpe (66), Ron Streck (66), James Mason (67) and R.W. Eaks (69) share sixth place at 7-under-par 135.
Wayne Levi (67), Dana Quigley (67), Loren Roberts (68), Craig Stadler (68) and Dick Mast (68) are tied for 10th place at minus-6.