Lee's second-round six-under-66 thrust the Australian into serious weekend contention for the second time in three years at TPC Sawgrass.
The gifted 26-year-old from Perth, a six-time pro winner still seeking his breakthrough triumph on the PGA Tour, recorded seven birdies and just one frustrating, sloppy bogey at his par-5 final hole to claim a share of the 36-hole lead.
At 11 under, following an opening 67, Lee is level at the top with American Akshay Bhatia, who matched his 66.
Another US player, JJ Spaun, the joint first-rounder leader, is one behind after a 68.
Rory McIlroy also enjoyed an impressive second round, making six birdies in his first 11 holes, but a poor finish with two late bogeys meant he ended up with a 68 to lie two shots off the pace.
Fellow major winner and Lee's new Vegas neighbour and money-game mate Collin Morikawa had nine birdies in his 65 to join McIlroy on nine under.
But Lee looks very much the man to beat at golf's so-called "fifth major", which carries a staggering $$US25 million ($A40 million) purse and $US4.5 million ($A7.1 million) winner's cheque.
While others have struggled around the Stadium Course, Australia's co-leader has made it look easy over the opening two rounds.
"I'm not sure why," he said.
"But I think my two-iron, I'm using that a lot and it's a pretty good weapon of mine.
"I can kind of draw it and hit it straight and it goes a long way. When I hit it good it goes, ends up going a long way. That helps. Then you have short clubs into holes.
"So, yeah I would love to hit two-iron everywhere but obviously you can't. Some holes that's it."
Lee, who's nicknamed 'Chef' for his ability to really 'cook' on the fairways, got on a hot streak in successive holes between the third and the fifth, arrowing approaches to four, six and 11 foot respectively and sinking all three putts.
Lee played in the final group on Sunday in his Players' Championship debut, but wound up sharing eighth after taking a triple-bogey seven on the fourth hole.
"Big learning curve," he said.
"Especially the fourth hole, that's probably one shot that I regret in my "career.
"It was a wedge that I got steep on and it's been the narrative for a long time."That's a big part of why I'm getting a little bit better with my approach play."A bit more level-headed and a lot of learning between then and now."
Chasing an unprecedented title hat-trick, world No.1 Scottie Scheffler is six shots off the pace in a tie for 16th at five under following a second-round 70.
Justin Thomas is one stroke further back after equalling Tom Hoge's course-record 62.
But Lee's fellow Australians Adam Scott, the 2004 champion, and Karl Vilips, a breakthrough winner last week at the Puerto Rico Open, both missed the halfway cut.
