Ernie Els, who shared the first-round lead with Karlsson, posted a 2-under 69 in the second round and is tied for third place with Michael Campbell (67) and Trevor Immelman (66). The trio is knotted at 8-under-par 134 at the Alpine Course at Golf Club Crans-sur-Sierre.
Karlsson trailed Els, Campbell and Immelman by two strokes when he teed off Friday but quickly matched the threesome in first. Karlsson birdied his first two holes to get into a tie for the lead but the Swede ran into problems later in his front nine.
Karlsson double bogeyed the par-3 third hole and bogeyed the fifth to fall well off the pace but the 34-year-old knew the course well enough to know that he was far from out of the tournament.
'I made a double-bogey-5 at the third hole but didn't let it worry me,' said Karlsson. 'You know there are plenty of birdie chances out there so you have to be patient and wait for things to happen.'
Karlsson collected birdies at seven and nine to get within one shot of the lead but assumed the top spot on the second nine. He birdied three holes in a row from the par-4 12th to sit atop the leaderboard after six consecutive rounds of this tournament.
'I haven't really thought about it,' said Karlsson, who went wire-to-wire last year. 'I have just gone out and played and enjoyed the course. It's easy to drop shots here so you have to take things as they come.'
Karlsson could have ridden a hot streak into the European Masters but struggled in the final round last week at the BMW International Open. He squandered the final-round lead in Germany but said on Friday that he would gladly give up his streak atop the leaderboard on Saturday to visit the winner's circle on Sunday.
'Frankly, I would be happy to lose the lead tomorrow just as long as I reclaimed it on Sunday night,' said Karlsson.
Romero, the 49-year-old Argentinean, did not look like someone getting ready to join the Champions Tour next summer. He mixed five birdies and a bogey on Friday to post a 4-under 67.
'I played fantastic, better than yesterday,' said Romero, who opened with a 66 on Thursday. 'I am hitting the ball very solidly and have a lot of confidence in what I am doing. I am playing better each day and I like my position for the weekend.'
Els tallied five birdies and three bogeys but is in solid position for his fourth win on the European Tour in 2003.
'I am still in it. I feel quite happy with the way things have gone and I am looking forward to the weekend.,' said Els, the second-ranked golfer in the world.
Campbell and Immelman are both carrying extra motivation into this week. Both missed out on automatic spots on the International Presidents Cup team and captain Gary Player did not select either to round out his squad.
'It is part of my motivation,' acknowledged Campbell. 'I want to try to win every tournament between now and the Presidents Cup to try to prove a point, not only to Gary but myself as well. That's the most important thing.'
Immelman, who grew up less than three hours from Fancourt, the site of the Presidents Cup, echoed Campbell's sentiments on Friday.
'Absolutely, I do feel I have a point to prove but more to myself,' said Immelman. 'The Presidents Cup was probably one of my biggest goals of the year. That was a bitter pill to swallow.'
Paul Eales (69), Peter Hedblom (68), Patrik Sjoland (68) and Richard Sterne (64) share sixth place at 7-under-par 135 followed by Brian Davis (66), Nathan Fritz (66) and Raphael Jacquelin (67), who are tied for 10th place at minus-6.
Sergio Garcia is in the hunt at 5 under par, while Colin Montgomerie is a shot behind Garcia at minus-4.
The 36-hole cut fell at even-par 142 and among the notable players who failed to advance to the weekend were 1999 European Ryder Cup captain Mark James and 2003 Volvo PGA Championship winner Ignacio Garrido.