Webb, who shared the first-round lead of this 54-hole event with Ward, only managed a 1-under 71 in the second round. Dunn carded a 5-under 67 to join Webb at 8-under-par 136.
Lorena Ochoa established a new course record on Friday with a 9-under-par 63. The former mark of 65 was set in 2003 by Michele Redman.
'I am just excited the way I played today,' said Ochoa. 'I was feeling very good from the beginning. I was in red numbers really quick and I started viewing the tournament in a different way.'
Ochoa is tied for fourth place with 16-year-old amateur In-Bee Park (71), Nicole Perrot (71) and Mi Hyun Kim (71) at 7-under-par 137.
Ward began on the back nine at the Las Vegas Country Club on Friday and got off to an uneventful start. She parred her first eight holes before a birdie at the par-5 18th, when her pitching-wedge third shot stopped almost 2 feet from the hole.
'It was a slow start,' admitted Ward. 'But that's okay.'
It was okay because Ward caught fire on her second nine. First, she dropped a shot at the first when her drive landed in the trees on the right side. Ward two-putted from 10 feet for a bogey, but the 31-year-old atoned for the mistake.
At the second, Ward hit a 59-degree wedge to 7 feet to set up birdie. She parred her next three holes, but used a pitching-wedge to get 3 feet from the cup at six. Ward birdied that hole, then gave herself the three-shot lead with her closing two holes.
On the eighth, Ward only needed a pitching-wedge for her approach and stopped the ball 9 feet from the hole. She drained the birdie putt, then missed the green right with her second at the par-5 ninth. Ward chipped to 6 feet and converted the birdie putt for the lead at the midway point.
'You have to stay aggressive on this course. There is no doubt about that,' said Ward. 'I was making some really good saves, but that doesn't jump you ahead any. It was important that I made a birdie on 18 and got it going a little bit after that.
Ward has three victories on the LPGA Tour, but is winless since the 2001 Wendy's Championship for Children. She has no top-10s so far in 2005, but recent work with a sports psychologist and a change in putters makes Ward believe she is ready to return to the winner's circle.
'It's a tendency when you shoot a low number to kind of fall back into a comfort zone and protect a little bit,' said Ward, who opened with a 65 on Thursday. 'I talked to her (Debbie Crews, her sports psychologist) last night and she said, 'you know what you have to go do tomorrow?' I said, 'yes, more of the same.' She said, 'no, you've got to turn it up a notch.''
Webb had an up-and-down round on Friday. She rolled in a 7-foot birdie putt at the second, but dropped a shot at the next when she three-putted from 40 feet at the par-3 third.
The 2000 champion of this event collected back-to-back birdies around the turn. She wedged her approach to a foot at the ninth, then sank a 6-footer at No. 10.
Webb was tied for the lead with Ward at 9 under until Webb once again had trouble with a 7-iron at a par-3 hole. She three-putted again from 40 feet to fall to 8 under par. When Ward birdied her final two holes, Webb fell three back.
'I just didn't feel as comfortable as I did yesterday,' admitted Webb, who outlasted Annika Sorenstam in a playoff for her win in 2000. 'I've got to be a little bit sharper tomorrow and give myself more opportunities.'
Dunn overcame a double bogey on her second hole, the 11th at Las Vegas Country Club, with eight birdies and one bogey.
Redman (68), A.J. Eathorne (67), Dawn Coe-Jones (68), Paula Creamer (68), Dorothy Delasin (69) and Wendy Doolan (72) are tied for eighth place at minus-6.
Defending champion Cristie Kerr made the cut on the number Friday. She shot a 1-under 71 in the second round to finish at 1-under-par 143.