Lee posted her second successive 4-under 68 to move to 7-under for the tournament and a share of 15th place but she is 10 strokes adrift of runaway leader Su-Yeon Jang.
Jang, sharing the overnight lead but with two holes to complete of her second round, made a birdie when she returned to the course to take a one shot lead into day three then posted a bogey free 65 to get to 17-under for the week and a three shot lead.
American Cristie Kerr and Canada’s Alena Sharp are her nearest pursuers at 14-under, Kerr setting a course record with a 10-under 62 which included an inward nine of 7-under 29.
Lee is part of an eight-way tie at 7-under with Queensland’s Katherine Kirk slipping to T23 with an even par 72 to be 6-under.
World Number One Lydia Ko, who has struggled for consistency in 2017, showed glimpses of her best with a bogey free 7-under 65 to T7 but eight off the pace.
Lee won the tournament last year after starting five shots behind in the final round bit posting a brilliant 63 to take the title by one.
It will require something similar tomorrow if she is to have any chance of claiming a fourth carer LPGA title and even then would require some poor play from those ahead.
Jang, playing the tournament on a sponsor’s invite, will need to be at her best tomorrow if she is to triumph as an intimidating list of players is chasing her.
Two time major winner In Gee Chun is outright 4th at 12-under while World Number Three Ariya Jutanugarn signed for a 2-under 70 to be outright fifth at 11-under.
ANA Inspiration winner So Yeon Ryu is also in the mix after a second consecutive 69 got her to 10-under-par and outright 6th.
Sarah Jane Smith, the only other Australian to make the weekend, shot a third round 74 to slip to 1-over for the week and be T73.