McGee, who shot a 67 for a 36-hole total of 8-under-par 136, is looking for his first victory in 239 starts on the Senior Tour.
Hot on his heels is Bruce Fleisher, the 1999 rookie and player of the year who racked up 11 wins in his first two seasons on the elder circuit. Fleisher turned in a bogey-free 68 Saturday to get to 6-under par.
The 57-year-old McGee, who played a full season last year after having his 1999 campaign interrupted by cancer surgery, sank a 25-foot birdie putt on the 7th hole Saturday to make his way out at 4-under for the tournament.
He rang up three birdies over a four-hole stretch from the 12th to the 15th, then finished up with a four-footer for birdie at the par-4 home hole.
McGee won four times in a 15-year PGA Tour career that ended in 1981 because of hypoglycemia. He joined the Senior Tour in 1993 and has posted 24 top-10 finishes, with his best showing a tie for second at the 1997 BankBoston Classic.
Fleisher, who hasn't titled since the Long Island Classic in July, made the turn at 3-under for the day with birdies at the 1st, 4th and 9th holes. He added a birdie at the 15th on the way to his fifth consecutive sub-par round in this event.
Fleisher, who has five top-10s this season including a second at the Verizon Classic, had a share of the lead through two rounds here last year but wound up tied for second with Hale Irwin.
Walter Hall, Howard Twitty and 1999 winner Vicente Fernandez share third place at 5-under, while Tradition champion Doug Tewell fired the day's best score of 6-under 66 for solo sixth at minus 4.
Irwin, a back-to-back winner of this event in 1997-98, is currently tied at 3-under 141 with Jose Maria Canizares and defending champion Larry Nelson.
Nelson closed with an 8-under 64 last year to secure the first of his Senior Tour-leading six victories in 2000.
Full-field scores from the Las Vegas Senior Classic