Thompson hit driver on all 14 long holes and was rewarded with eight birdies in a six-under-par 66 at Monroe Golf Club in Pittsford, New York.
She birdied all four of the par-fives and only a couple of three-putt bogeys prevented her from going even lower.
"Coming into this week, I knew this course was going to be setup good for me," Thompson told reporters after ending the day locked with Lee, one stroke ahead of Canadian Jennifer Kirby, American Brittany Lincicome and Colombian Lisa McCloskey in the fourth LPGA Major of the year.
"I get to hit driver on every hole and I can reach some of the par-fives (in two shots), which is definitely an advantage."
Thompson, 19, clinched her first Major title at the Kraft Nabisco Championship in March, where she outplayed Michelle Wie in the final round.
Wie subsequently won the U.S. Women's Open but is absent this week due to a finger injury.
"Getting that Kraft Nabisco win has helped me out so much," said Thompson, who qualified for a US Women's Open at the age of 12, a record at the time.
"Pulling it off that Sunday, being relaxed and staying with it one shot at a time and doing my routine gave me a lot of confidence going into every other tournament after that, especially Majors."
Not that it has been all smooth sailing recently, with a missed cut along with a mediocre performance at the Women's British Open.
"My last few tournaments my irons weren't really spot on but I've been going through a little bit of a swing change just trying to get my club face in the right position," she said.
"It definitely takes a lot of time to get used to, but golf is a lot about confidence.
"You just have to go into every shot just telling yourself you're going to pull it off, but going through the swing change has definitely slowed me down a little bit."
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- Monroe Golf Club
- Kraft Nabisco Championship