Karrie Webb shot a 65 to move into a tie for third with Carin Koch at 9-under-par 207. Defending champion Se Ri Pak was one shot further back after a a round of 67.
Kung was tie for fourth to start the day at Berkleigh Country Club and picked up an early birdie at the par-4 first after her approach landed within 10 feet of the hole.
She picked up steam towards the end of her front nine with a birdie at the seventh and another at the eighth. At the par-4 ninth, Kung hit her second shot to six feet and ran home the putt for her third consecutive birdie.
King added a birdie at the par-5 13th and two-putted for a birdie at the par-5 18th to secure sole possession of the lead.
'I am hitting the ball really well right now,' said the 22-year-old, who earned her first career victory earlier this year at the LPGA Takefuji Classic. 'It's a matter of the putts going in the hole. I think my chances are pretty good going into tomorrow.
'After winning my first one, I've been looking for the second one. It is tougher to get the second one. You know you can win. I'm just going to go out there and have fun.'
If Kung wants to close out a victory on Sunday, she will have to hold off several big names including the hard-charging Webb, who is seeking her first victory of 2003.
Webb finished the day with a flurry of birdies on Saturday. After collecting three birdies and one bogey over her first 13 holes, the Australian birdied each of her last five holes to pull within three shots of the lead.
'I had a very solid round and it was a lot different than the last two rounds,' said Webb. 'I actually made some putts today. I did not really make anything the last two rounds.'
Beth Daniel carded a 71 to finish five shots back along with Pamela Kerrigan at 7-under-par 209. Heather Bowie was one shot further back at 6-under-par 210.
Lorena Ochoa, Soo-Yun Kang and Dawn Coe-Jones finished in a tie for ninth at 5-under-par 211.