J. B. Holmes, who played on the winning U.S. Walker Cup squad last year, posted a 7-under 64 to move into second place at 10-under-par 132. Paul Stankowski carded a 66 to move into a share of third place with first-round leader Steve Lowery (68) at minus-9.
Defending champion Phil Mickelson stumbled to a bogey on his 14th hole and a double bogey on his final hole, the ninth, to drop back into a tie for eighth at minus-7.
Henry, who missed the cut in his first two starts this season, got off to a good start with his putter, as he saved par on the first from over 30 feet out. He converted his first birdie effort on the par-3 fourth at TPC of Scottsdale.
The 30-year-old moved to 6 under when he birdied the sixth. Then after a pair of pars, Henry really caught fire. He sank a 10-footer for birdie on the ninth and made another 10-footer for birdie at the next.
Henry, who is looking for his first PGA Tour title, kept rolling as his putter stayed hot. He rolled in a 20-footer for birdie at the 11th and made it four in a row as he birdied the 12th.
He two-putted for birdie from 15 feet away at 13 and came right back with a 30-foot birdie putt on the 14th. Henry made it seven in a row as he ran home a 25-footer for birdie that got him to 13 under.
Henry's bid to tie the tour record of eight consecutive birdies ended at the 16th when his 12-footer stopped on the right edge of the cup.
However, he drained a 30-foot putt for birdie on the next to get to 14 under. Henry, who put his belly-putter back in his bag this week, closed by saving par from 10 feet out on the 18th.
'It was one of those days. The hole looked big for some reason,' Henry said. 'It's nice to play here, especially with the big crowds and the weather. It was really nice to get on that roll. I hit a lot of good shots and my speed was really good today on the greens.'
Holmes, who was the medalist at the 2005 PGA Tour Qualifying Tournament, got his round going with a 15-foot birdie putt on the second. He made it two in a row after two-putting for birdie at the next.
The 23-year-old rookie stumbled to a bogey on the fifth, but atoned for that error with a birdie on the sixth. Holmes rolled in a 10-footer for birdie at the ninth, then a 30-foot birdie try on 11.
Holmes two-putted for birdie on the par-5 13th. He then drained a 30-foot putt for birdie at the next. The Kentucky native watched his second shot to the par-5 15th come to rest 2 feet from the cup.
He tapped that in for eagle, which got him to 11 under. Holmes dunked a ball in the water on the 17th and that led to a bogey. He closed with a par at the last.
'It's completely different from anything else I've ever played in because of all the people,' said Holmes of the atmosphere at the tournament. 'We had like 54,000 for the pro-am or something, which is ridiculous.
'I've had a lot of fun so far, making putts, playing pretty good and sitting in a good position, giving myself a chance to win for the weekend. That is all you can ask for.'
Mickelson was joined in a tie for eighth place at 7-under-par 135 by Jeff Sluman, Jonathan Byrd, two-time tournament runner-up Justin Leonard, Scott Verplank, Camilo Villegas and Dean Wilson.
The cut fell at 1-under-par 141, with 72 players moving on to the weekend. Among those missing out on the final two rounds were U.S. Ryder Cup captain Tom Lehman (142), Davis Love III (143), David Duval (143) and Sergio Garcia (144).