Relishing early benign conditions, the 14-time major winner ripped through five birdies in his outward nine holes on the way to carding a five-under 67 to lead by one shot at nine under.
Woods finished with seven birdies and two bogeys to look more like his old self and not the one who hasn't won a tournament in two years.
"I played well today, I could have been lower on what would have been my first nine holes and basically I felt I didn't miss a shot and even though I shot five under today I felt it could have been eight or nine," Woods said.
"It feels good (on top of the leaderboard) but it feels good being there by actually playing properly and not like I am slicing it all over the place.
"I'm hitting the ball well and I've hit so many lips (of holes) these past few days that I felt it could have been pretty low."
Australian Peter O'Malley finished birdie-birdie for a six-under 66 to be a shot off the lead with top-ranked Australian Jason Day another stroke away on seven-under 137.
Woods, the former world number one, who has not won since the 2009 Australian Masters in Melbourne to send his world ranking tumbling to 58, backed up Thursday's unblemished opening round of four-under 68 in a sign of a long overdue return to form.
"I'm basically playing the way I have been playing at home, it's finally come to the golf course in a tournament setting, I've been hitting like this at home, but it just hasn't come out at a tournament," Woods said.
"It's progression. I've been through some changes before and that's what happened. It takes a little bit of time, but once it starts coming the confidence starts building."
Hitting off at the 10th tee, Woods' bogey-free run ended at the par-4 third and his 30th hole of the tournament where he missed a 30--foot putt for par.
But he made up for the loss of a stroke with a 25-foot birdie at the fourth hole.
O'Malley had an unblemished round of six birdies to charge up the leaderboard, while world number seven Day, playing in the same group as Woods, had five birdies and a bogey and were urged along by a large home gallery.
"I only missed two fairways, I hit 18 greens and hit two par-fives in two, I probably had 32 putts for six-under so that's pretty good golf," said O'Malley, who plays regularly at The Lakes.
Overnight leader Jarrod Lyle of Australia was among the afternoon groups.