Schroeder went deep with a 70-foot birdie putt from the edge of the green at the par-3 3rd hole, then began a streak of three straight birdies with a 20-footer at the fifth.
'I got off to a great start with the long birdie putt at No. 3,' said Schroeder, the winner of a 1973 match-play event on the PGA Tour who is seeking his first win on the elder circuit. 'I attribute my round to the putter I'm using. It's allowed me to roll the ball a lot better.'
Schroeder needed some good rolls around the turn, as he put himself in the position to have to make two six-footers and a 10-footer to save par at Nos. 8, 9 and 10.
He notched another par save with a great greenside bunker shot at the 12th, followed by a gap wedge to 10 feet to set up his final birdie at 13.
'I didn't miss any putt that was makeable today,' said Schroeder, whose 65 matched his career-low round on the Senior Tour. 'You need to do that if you are going to win.'
Currently in his sixth season on the Senior Tour, Schroeder earned partial exempt status for 2001 with a top-16 finish at the Senior Tour National Qualifying Tournament in December. A non-exempt player over the last two years, Schroeder played in only 11 events in 1999 and just five in 2000.
Should Schroeder keep the lead Saturday and hang on to win Sunday, he would become the third player in successive years to win this event in wire-to-wire fashion. Bob Duval led from start to finish in 1999 and Gil Morgan turned the trick last year.
Smith, who joined the Senior Tour late in last year's campaign, also qualified for a conditional exemption for this season based on his finish at Q-School.
He mixed three birdies with two bogeys on his front nine Friday, but was steady on the way in with birdies at Nos. 11, 14 and 15.
Jim Colbert, who rang up his 20th Senior Tour victory and his first since 1998 at the SBC Senior Classic two weeks ago, is tied with Mike Hill, Tom Wargo, Tom Jenkins, Walter Hall and Toshiba Senior Classic winner Jose Maria Canizares at 2-under par.
Larry Nelson, No. 1 on the money list with two early season wins, is four shots off the pace with seven others after shooting 69 over the par-70 layout.
Morgan is six strokes back at 1-over par.
Full-Field Scores from the Emerald Coast Classic