Juli Inkster carded a 4-under 68 to finish three shots off the lead at 14-under-par 202. She was joined by Beth Daniel and Meg Mallon in a tie for third.
Matthew began the day in a tie for first with Kane at Corning Country Club. Both players were on fire early, each collecting four birdies over their first nine holes to stay knotted around the turn at 16-under.
Kane lost the lead when a bogey at the 10th but recovered at the par-5 12th after her third shot stopped four feet from the cup. Moments later at the same hole, Matthew chipped to within a foot of the cup from off the green and tapped in for birdie to stand alone in first at 17-under.
Matthew drained a five-foot putt at the par-5 14th to reach minus-18 and extend her lead to three shots. She found a glitch in her game, however, with bogeys on each of the next two holes.
'Those three-putt bogeys coming down the last couple of holes certainly didn't help,' said Matthew. 'It was just one of those things.'
With her competitors within one, Matthew hit her approach inside 12 feet for a birdie at the 17th. She parred the last to secure a two-shot advantage in search of her second career victory on the LPGA Tour.
Kane was on fire early with a four birdies over her first six holes but she was unable to shake Matthew.
After she regained a share of the lead with the birdie at 12, Kane dropped a shot with a bogey at the 13th and failed to make up any ground the rest of the way.
'I took advantage on the front side but I didn't do so well on the back side,' said the Canadian, who carded a third-round 69. 'I missed a couple of drives and really didn't give myself too many chances until the finishing holes. I just left a few out there.'
Helen Alfredsson collected five birdies and two bogeys for a round of 69. The Swede finished alone in sixth at 13-under-par 203.
Wendy Ward and Soo-Yun Kang finished in a tie for seventh at 12-under-par 204. Rosie Jones, who has won this event twice, was one shot further back at 11- under-par 205.
Natalie Gulbis, Danielle Ammaccapane, Nancy Harvey, Anna Acker-Macosko and Karen Stupples share 10th place at 10-under-par 206.