Annika Sorenstam carded a 71 to finish alone in fourth place at 3-under-par 141. Karrie Webb, Young Jo, Dina Ammaccapane and first-round leader Hee-Won Han were one shot further back at 2-under-par 142.
Kerr played the back side first and hit a wedge to 2 feet for a birdie at the par-4 10th. She then birdied two in a row starting at the par-5 12th and dropped a shot at the par-4 16th after her second shot came up short of the green.
The 27-year-old responded at the par-5 18th and played her third shot to 18 feet for a birdie to reach 5 under around the turn. Kerr then knocked her approach inside 2 feet for a tap-in birdie at the par-4 first.
Kerr missed a short par putt at the par-4 third but dropped a wedge within 20 feet at the par-5 sixth. She drained the birdie putt and parred her way in to carry a two-shot advantage into the final round.
'I will just do the best I can and things will add up where they add up,' said Kerr, who tied for second last week in Hawaii.
Dunn mixed two birdies with two bogeys for a round of 72 while Son collected a pair of birdies and a bogey over her first nine holes. Son then birdied the 10th and got within one of the lead with a birdie at the 13th.
Son stumbled to a bogey at the 15th, however, to join Dunn in a tie for second after a round of 70.
Sorenstam bogeyed the second but countered with a birdie at the fourth. She gave that shot back with a bogey at the fifth but recovered again with back-to-back birdies starting at the par-5 sixth.
The Swede hit her tee shot inside 4 feet for a birdie at the 11th and got within one of Kerr with a birdie at the 13th. Sorenstam found trouble at the 15th, however, when her third shot found a creek en route to a double bogey.
'I thought I played pretty well today,' said Sorenstam. 'I had a few bad breaks or bad bounces here and there and a few bad shots, but then again I made some good putts in the end.'
Natalie Gulbis, Laura Davies, Patricia Meunier-Lebouc, Soo Young Moon, Brandie Burton and Michele Redman share ninth place at 1-under-par 143.
Play was suspended for darkness for the second straight day at Bosque Real Country Club with four players left to complete their second rounds on Sunday.