Hughes was joined at 13-under-par 129 by 1999 champion Brad Elder, who shot 7-under 64 in round two.
First-round leader Nicholas Thompson posted a 2-under 62 to move to 11-under-par 131. He shares third with 2003 winner Jeff Klauk (64) and Justin Smith (65).
Aron Price carded a 64 and completed two rounds at minus-10. He is tied for sixth with 1997 champion Ben Bates, Vance Veazey, David McKenzie, Ryan Hietala and Mark Walker.
Hughes played the back nine first on Friday and opened with a birdie on the 10th. He parred the next before running off three straight birdies from the 12th on the North Course at Crestview Country Club.
The Australian made the turn in 9 under after a birdie on the 18th. Around the turn, Hughes birdied the third.
Hughes parred three in a row from the fourth, before catching fire again. He birdied the seventh and followed with birdies on eight and nine to grab a share of the second-round lead.
This is a big change for Hughes, who has made just two cuts in his last 12 starts and his best finish all year is a tie for 26th.
'I've been playing awful. I've struggled with my putter all year,' Hughes admitted. 'I finally felt comfortable rolling the ball and that has helped everything else. I haven't done anything different this week. I've won here before. There's something comfortable about coming back here.'
Elder picked up birdies on three and five to start his round. He dropped a shot on the sixth, but came back to birdie No. 9.
The 32 year old made it two straight with a birdie at 10. Birdies on 14 and 16 got him to 11 under. Elder converted an eagle on the par-five 18th.
'It's a fun golf course. It fits my eye and I seem to play well when I come here,' stated Elder. 'I had a chance to win three years ago here. I have good thoughts coming here.'
Martin Laird, the Athens Regional Foundation Classic winner, is one of eight players tied for 12th at 9-under-par 133.
The cut line fell at 5-under-par 137 with 70 players moving on to the weekend. Among those who missed the cut were 2006 champion Kevin Johnson (141) and Knoxville Open winner Chez Reavie (144).