'As much as I didn't feel like I played well today, I'm happy with the score I shot,' said Nitties.
Bob Estes, who held the lead after the opening round, three-putted the 18th green for a bogey to finish one shot back at 13-under-par 203 after a round of 70. Corey Pavin, Peter O'Malley and defending champion Peter Senior shared third place at 12-under-par 204.
Nitties jumped out of the gate on Saturday with a birdie at the par-4 first. He faltered to a bogey at the third, but responded well with back-to-back birdies starting at the fourth.
The young Australian then bogeyed the seventh to fall behind Estes, who torched the front nine with four birdies to make the turn at 15 under.
Estes found trouble with a bogey at the 11th, but countered with a birdie at the very next hole. Nitties hit his second shot to 12 feet at the 13th and drained the putt to get within one of the lead, but he fell two shots back with a bogey at the following hole.
Estes bogeyed the 15th, but held a slim lead heading to the final hole. Nitties hit a tremendous approach that came to rest 5 feet from the hole while Estes sent his second shot over the flag. Nitties converted his short birdie putt to reach 14 under and Estes' putting let him down for a closing bogey.
Peter Lonard, who won the Australian Open last week, finished alone in sixth place at 11-under-par 205. Nick O'Hern and John Senden were two shots further back at 9-under-par 207.