Needing a four at the 18th to establish a 36-hole low on the US circuit, Mickelson surprisingly stumbled when his three-wood off the tee ended up in water to the left. After taking a penalty drop, he failed to get up and down from 161 yards.
The American left-hander, who came within a whisker of becoming the sixth player on the US PGA Tour to dip under 60 in the first round, had to settle for a six-under-par 65 at the TPC Scottsdale and a 17-under total of 125.
"It's disappointing to finish both rounds the way I did," twice Phoenix Open champion Mickelson, who lipped out with a birdie putt from 25 feet on his final hole on Thursday in his bid for a magical 59, told Golf Channel.
"But I've been playing well and I'm having a lot of fun around this golf course. It's a course where you can make a lot of birdies and it's fun, it's fun not to get beat up all the time."
Seeking his 41st US PGA Tour title, Mickelson ended another day of dazzling sunshine and ideal scoring conditions in Scottsdale, Arizona four shots ahead of compatriot Bill Haas, who carded a 64.
FedExCup champion Brandt Snedeker (66) and fellow American Keegan Bradley (63) were a further stroke back at 12 under.
However, the tournament already appears to be Mickelson's to win or lose based on his scintillating form over the first two days.
Four ahead of the field when the frost-delayed first round was completed earlier on Friday, Mickelson made a slow start with six consecutive pars before catching fire.
He sank a long-range birdie putt at the seventh and, after hitting an exquisite approach to four feet, birdied the ninth to reach the turn one ahead of the chasing pack at 13 under.
Mickelson picked up further shots at 11, 12 and 13, knocked in a four-footer to eagle the par-five 15th and also birdied the driveable par-four 17th to storm six strokes clear.
With a par at the last, he would have eclipsed the US PGA Tour record low of 124 for 36 holes, held jointly by Pat Perez (2009 Bob Hope Classic) and David Toms (Colonial Invitational).
However, his wayward tee shot, followed by an approach which found the front of the green before his ball rolled back down into the fairway, put paid to that.
"This is a great example of what can happen on this course," Mickelson said of his double-bogey six on 18. "You've got a lot of water out there, a lot of risk-reward.
"You can make a lot of birdies and eagles, like I did, but you can also makes bogeys and doubles, like I did on 18. It's going to be an interesting weekend because a lot can happen, and usually does here."
Asked to outline his strategy going into the final two rounds at Scottsdale, Mickelson replied: "I am going to have to keep making birdies and shoot some low rounds.
"But I am playing really well and hitting good shots. I'm driving it off the charts and so, when you drive it like I've been, I can be aggressive into this pins and be thinking birdies all the time.
"So every hole presents a great birdie opportunity and I've been putting well too."
The cut fell at four-under 138 with 2008 Masters champion Trevor Immelman of South Africa, Germany's former world number one Martin Kaymer and 21-year-old Japanese Ryo Ishikawa among those failing to advance.
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