The 51-year-old Victorian shot a three-under 69 in Saturday's second round to get to 12-under 132 at En-Joie Golf Club and will be targeting a wire-to-wire victory on Sunday.
Boo Weekley is one shot back after a sizzling 64, while fellow American Jason Caron is two behind after carding a 68.
Allan's countryman Greg Chalmers posted a 66 and is tied fourth with Americans Kevin Sutherland (66) and Paul Goydos (68), three off the pace.
Allan closed with his fourth birdie of the day to secure the outright lead heading into the final round, having opened the tournament with a red-hot 63 on Friday. He claimed his maiden win on the 50-and-over tour at the Galleri Classic in March.
"Yeah, it's always nice to have a chance. It doesn't happen that often, for me anyway," said Allan, who tied for sixth on this tournament last year.
"I didn't play my best today. I'm going to have to play a lot better than that tomorrow to win. I was in the rough way too often and sort of scrambling."
"Hung in there really well," he continued. "Almost got away with no bogeys, made one on 17, but bounced back on the last."
Weekley carded eight birdies during his stellar bogey-free round.
"It's good to be back in contention," Weekley said. "I mean, been playing pretty solid this week and making some putts, which is fun to see go in."
Caron knocked down six birdies and also had two bogeys, both coming on par-4s on the back nine. But he recovered to make birdies on 16 and 17.
"I'm just going to do what I've been doing, which is just trying to control what I can do and not what everyone else does, (and) have fun," Caron said.
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