The defending champion pulled off a five-shot swing to open up a three-stroke lead over halfway pacesetter and former world No.1 Jiyai Shin with a course-record five-under-par 67 on Saturday.
Australia's world No.5 Minjee Lee roared back to life after a disappointing second round to also fire a new low mark of 67 and sit in outright third.
Alas, Lee will need to make up a seven-shot deficit on Buhai, who doesn't look like budging in her quest to become the first player since Taiwan's former world No.1 and five-time major champion Yani Tseng in 2011 to successfully defend the title.
After starting the day two shots behind Shin, Buhai birdied the first four holes and  collected another on the back nine to charge to 12 under for the tournament.
The 2022 British Open winner surged as Shin threw in a double-bogey seven at the fifth to offset two front-nine birdies and she suddenly found herself playing catch up.
South Korean Shin, the 2013 Women's Australian Open champion, managed two late birdies to at least remain in touch entering championship Sunday
Jiyai Shin is seeking to win a second Women's Australian Open title 10 years after her first. (Dan Himbrechts/AAP PHOTOS)
Lee isn't giving up either after rebounding from a deflating 75 on Friday to give herself a glimmer of hope and also keep the dream of an historic family double alive
The sister of men's third-round co-leader Min Woo reeled off five birdies on the front nine alone.
"I just hit my irons a little bit closer and that just gave myself a couple more opportunities for birdies," Lee said.
"So yeah, had a really nice front nine and made one bogey and one birdie on the back.
"I'll just have to post a really low score tomorrow, I think, but I can do it."
Fellow Australian LPGA Tour star Steph Kyriacou - who went to school right next door in Kensington and often played The Australian before and after her studies - also made a move with a 69 to jump up to equal fourth at four under with South Korean Jenny Shin (74).
Lee and Kyriacou seem the only two home hopes with a chance of breaking the nine-year women's title drought.
Legendary four-time champion Karrie Webb is the only Australian to win the women's Open in the past quarter of a century and last reigned in 2014.
Teenage amateur Ann Jang earlier on Saturday recorded a rare albatross in a spectacular start to her third round.
Jang holed her three-wood second shot at the par-5 first hole to leap from three over to even par for the championship in one fell swoop.
Local teen Ann Jang showed her talent, making an albatross during the third round. (Dan Himbrechts/AAP PHOTOS)
A member of the nearby NSW club in La Perouse, 16-year-old Jang is the latest amateur to announce their arrival on the big stage this week, rocketing up to a share of 11th on the leaderboard midway through her third round.
Jang eventually signed for a 73 to be tied for 22nd at four over.
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