Morgan established a new 36-hole record for this tournament with his two-round total of 130. John Bland set the old mark of 131 in the 2002 tournament.
Morgan is in a familiar position. Last week, he held the lead with one round to go at the Senior PGA Championship, but finished alone in third place, two shots out of the playoff ultimately won by Jay Haas.
'Last week was disappointing,' acknowledged Morgan, who finished as the runner-up the first year of this tournament. 'It was an opportunity I let get away.'
Loren Roberts, a three-time winner this season on the elder circuit, posted a 6-under 65 and is alone in second place at minus-11. Hajime Meshiai (64) and Kirk Hanefeld (65) are knotted in third place at 10-under-par 132.
Morgan began the second round two shots off the lead, but recorded a pair of 4-foot birdies to open his round. He dropped a shot at the sixth thanks to a missed green, but caught fire before he made the turn.
He knocked a 9-iron to 5 feet to set up birdie at the seventh. Morgan holed a 15-footer for birdie from the fringe at eight and polished off three birdies in a row with a 12-footer at No. 9.
Morgan notched his next birdie, and took the lead, at the par-4 13th when he ran home a 10-footer from left of the flagstick. Morgan parred the 14th, but returned to his birdieing ways one hole later.
At the par-5 15th, Morgan came up short with his second shot. He knocked his third to 3 feet and converted the short birdie putt to grab the lead at minus-11.
Morgan rolled in a 5-footer for birdie at No. 16 to pad his lead to two shots. He had a pair of decent looks at birdie at both 17 and 18, but missed. No matter as Morgan is in position to earn his first victory on the Champions Tour since the 2004 SBC Classic.
'I started off fast,' said Morgan. 'Everyone in our group was playing well. I seemed to have played a little bit better. I didn't drive it well today, but I putted well and made a couple of good saves.'
If Morgan can visit the winner's circle on Sunday, he will collect his 24th victory on the Champions Tour. That would tie for third on the all-time wins list with Miller Barber.
Roberts posted his first birdie at the fourth when his pitching wedge approach at the fourth stopped 3 feet from the hole. He added a 12-foot birdie putt at the sixth and an 18-footer at the eighth to make the turn at 3-under 32.
On the second nine, Roberts hit an 8-iron inside 6 feet for a birdie at the 12th. He kept pace with Morgan thanks to a short birdie putt at 15 and a 7-footer at No. 16.
'You've got to keep making birdies here. You can't sit still,' said Roberts, who is second on the money list. 'I played real solid today. I'm right where I want to be.'
Defending champion Tom Jenkins, who was the runner-up in 2004, carded a 5- under 66 on Saturday. He is tied for fifth place with John Harris (65) and David Edwards (67). The trio is knotted at 9-under-par 133.
Keith Fergus (65), Tom Purtzer (66), Morris Hatalsky (67) and Jim Thorpe (69) are tied for eighth at minus-8.
First-round leader Scott Simpson only managed an even-par 71 on Saturday and is part of a group tied for 12th place at 7-under-par 135.