Dredge's countryman, Stephen Dodd, used a 3-under 69 to move into second place at minus-8. Darren Clarke shot 4-under 68 in round two to climb into third place at 7-under-par 137.
Jeev Milkha Singh and Anthony Wall also carded 68s to move into a tie for fourth place at minus-6. They stand alongside Soren Kjeldsen, who notched his second straight round of 3-under 69 in round two.
The K Club's Smurfit Course is the host venue this week. The K Club will host the Ryder Cup come September, but that will be played on the Palmer Course.
Both Ryder Cup captains played here this week. United States captain Tom Lehman carded a 2-under 70 Friday to post 3-under-par 141 through two rounds and make the cut. European captain Ian Woosnam struggled to a 4-over 76 to miss the cut at 7-over-par 151.
Dredge opened with five straight pars from the 10th. He carded a birdie on the par-4 15th, his second in two days on that hole, to get to minus-8.
The Welshman, who turned 33-years-old on Thursday, cruised through his round from there. Dredge ran off 11 straight pars from the 16th to remain in a tie for the lead with Dodd.
Dredge moved to the top of the leaderboard with a birdie at the ninth, his last hole. He leads after two rounds for the fourth time in his European Tour career, although he has finished no better than a tie for third in the previous three events.
'I haven't made a bogey yet, but I hate to tempt fate,' Dredge said. 'I haven't played fantastic from tee to green the last few days, but I've scrambled really well and I've holed some good putts when I needed them and knocked some shots close at the right sort of time.'
Dodd, who won the WGC-World Cup with Dredge last year, played the front nine first Friday and struggled out of the gate. He tripped to a bogey on No. 1 to slip back to minus-4.
The 39-year-old reclaimed that lost stroke with a birdie on the third, but gave that stroke right back with a bogey on the fourth.
Dodd caught fire late on his opening nine. He birdied the seventh and came right back with a birdie on No. 8 to move to minus-six. Dodd made it three in a row with a birdie on the ninth.
The two-time winner on the European Tour parred his next four holes, then rolled in a long birdie effort on the 14th to move to 8 under.
Dodd missed the green on the par-3 17th and was unable to save par from a greenside bunker. He did birdie the last from 8 feet to close at minus-8.
'I like the way the golf courses are set up in Ireland, and I think the weather has got a lot to do with how I play,' admitted Dodd, who won the Irish Open last year. 'I feel quite comfortable in these (windy) conditions. I tend to hit the ball pretty straight and that's what you need on these types of golf courses.'
Paul Casey is alone in seventh place at 5-under-par 139 after stumbling to a 1-over 73 Friday.
Niclas Fasth, who shared the first-round lead with Dredge, struggled to a 3-over 75 and tumbled into a share of eighth at minus-4. Fasth was joined there by eight-time Order of Merit winner Colin Montgomerie (71), Jamie Spence (72), Stephen Browne (67), Christian Cevaer (69), Jose Manuel Lara (68) and Steven O'Hara.
Lehman is one stroke behind that group, as is Henrik Stenson, World No. 4 and 2004 champion Retief Goosen and seven other players.
The cut line fell at two-over-par 146 with 75 players moving on to the final two rounds. Among those joining Woosnam with the weekend off were 2005 U.S. Open champion Michael Campbell and 1999 British Open winner Paul Lawrie (147), Kevin Stadler (148), Sandy Lyle (149) and Miguel Angel Jimenez (150).