The 31-year-old Queenslander fired a seven-under 64, as did Spain's Jon Rahm, to trail another major winner and LIV captain in Bryson DeChambeau by one shot on Friday (Saturday AEST).
Smith, who like DeChambeau is seeking his first LIV Golf win since 2023, started with three consecutive birdies and had six in his first eight holes en route to his lowest round of the season.
"I've put myself in a really good spot after round one," said 2022 Open champion Smith, who finished with nine birdies and two bogeys at Club de Golf Chapultepec.
"It's a tough golf course, especially to get it in the fairway, which is something that I've been struggling with. I decided to just kind of let it go and get out of my own way.
"Hopefully, I can go out there over the weekend and give it my all and hopefully walk away with a trophy."
The all-Australian Ripper GC team featuring Smith, Lucas Herbert (68), Matt Jones (68) and Marc Leishman (69) - who won the individual LIV Golf Miami event earlier this month - are equal first with DeChambeau's Crushers GC at 15 under.
Herbert and Jones are tied for sixth, while Leishman is joint-14th.
DeChambeau eagled his first hole of the day, the short par-4 second, and was four under through three. He carded just one bogey before finishing birdie-birdie-par-birdie.
"There was a lot of moments where I felt like I was going to get it to nine, 10 under, and there were moments where I'm like, man, I could be three under or two under easily if I don't get my act in shape," DeChambeau said.
"It's a teeter-totter golf course ... Fun to finish off with a nice bang on the last hole."
Rahm, the 2024 LIV Golf individual champion, is still searching for his first win since last September at LIV Golf Chicago, and also enjoyed conditions in Mexico.
"What better way to start it than with three birdies in a row," he said.
"That just set the tone, and felt really comfortable on the greens all day. Couldn't really have asked for a much better score."
American Bubba Watson (66) is alone in fourth, with England's Tyrrell Hatton fifth (67).
With Reuters.
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