Tom Scherrer, a two-time winner on the Nationwide Tour, stands alone in second place at 7-under-par 64. Kevin Durkin, Shane Bertsch and Charley Hoffman are one stoke further back at minus-6.
Pappas opened with a birdie on the par-4 third, but gave that stroke back with a bogey on the sixth. The South African then got a stroke back with a 12- foot birdie putt on the eighth.
The 37-year-old made it two in a row as he birdied the ninth from five feet out. Around the turn, Pappas dropped in a birdie putt on the par-4 11th, then caught fire down the stretch.
Pappas, a two-time winner on the Nationwide Tour, two-putted for birdie at the 14th and came right back to birdie 15 from 10 feet out to get to 5-under. He wasn't done, either. Pappas birdied 16 and 17 to move into a tie for the lead.
'I hit it pretty well and putted well today,' said Pappas. 'But I'll have to keep shooting low. No one else is going to slow down.'
He then holed out from a greenside bunker for eagle at the par-5 closing hole to post a 62. That total was one stroke shy of the tournament record, but did set a new course record. It was also a career-best score for Pappas.
'I got on a roll starting on No. 14,' said Pappas. 'The last five holes seemed easy to me today. It has been a while since I've had a streak like that. You have to putt well to have a streak like that.'
Scherrer played the back nine first on Thursday and sank a birdie on the 11th, his second. However, he tripped to a bogey at the next. The 35-year-old then rolled in back-to-back birdies from the 14th to move to minus-2.
The University of North Carolina alum picked up a birdie on the 17th. Scherrer then eagled the 18th to make the turn at minus-5.
Scherrer came right back with a birdie on the first, then cooled off with five straight pars. He got to minus-7 with a birdie on the par-4 seventh before parring his final two holes.
'I'm very happy with my round,' Scherrer said. 'I obviously played very well. I feel my game is going in the right direction.'
Troy Matteson, who won the Virginia Beach Open earlier this year, opened with a 5-under-par 66. He was joined in a tie for sixth place by Camilo Villegas, Matt Weibring, Alex Aragon, Jamie Broce, Stephen Collins and Jason Schultz.
Chris Couch, who is a two-time winner this season, and Joel Kribel lead a group of players one stroke further back at minus-4.