Scotland completed 36 holes at 9-under-par 135, where he was joined by fellow Englishman Lee Slattery, who shot 69 in round two.
Andres Romero, who held the lead on the back nine of the British Open last week before falling apart on the last two holes, carded his second straight 68 to climb into a share of third at minus-8. He recovered from a double-bogey on the second hole by running off five birdies in a six-hole span.
Romero stands alongside Oliver Wilson (70). Miguel Angel Jimenez, the 1994 runner-up, is alone in fifth at 7-under-par 137 after 68.
Scotland started his round on the back nine and birdied the 10th. He came back to birdie No. 13 to move to 7-under. Scotland stumbled to bogeys on 14 and 16, but recovered one stroke with a birdie at the 17th.
The 25-year-old Scotland parred four in a row around the turn at Gut Kaden. Scotland dropped in back-to-back birdies putts on the fourth and fifth to climb to minus-8, then gained a share of the lead with a birdie on the ninth, his last.
Scotland suffered a misplaced vertebrae in a bad car accident just after turning pro a few years ago. He has just returned to form in the last 12 months.
'I would be sitting at home watching the golf unable to play and thinking 'Is this going to be it for the rest of my life?'' Scotland said. 'Mom and Dad kept me going. Without them, it might have been a different story, but you hang on to a glimmer of hope thinking that I am going to make it.'
Slattery also started on the back nine. He ran off three birdies in his first four holes to move to 9-under, then traded a bogey for a birdie from the 14th.
Around the turn, Slattery parred five straight before bogeys on three and four dropped him to 7-under. He recovered one of those shots with a 40-foot birdie putt on five. Slattery, like Scotland, birdied the ninth to end at minus-9.
'It was like four seasons in one day out there and that messes with your concentration levels,' Slattery stated. 'I had to work very hard out there, but I'll have an early night tonight, have a good meal and refuel.'
Paul Casey posted a 2-under 70 Friday to move into a share of sixth at 6-under-par 138. He was joined there by Bradley Dredge (69), Anton Haig (69), Shiv Kapur (67) and Alexander Noren (71).
South African Richard Sterne (65) and American Brett Wetterich (70) share 11th at minus-5 with six other players.
The cut fell at 1-under-par 143 with 79 players moving on. Among those who missed the cut were first-round leader Simon Khan, who shot an 80 to end at 1-over-par 145. Also missing the cut were Paul Lawrie (144), Michael Campbell (145) and Francesco Molinari (75).