Lee surged into a share of third spot with a third-round five-under-par 66 at the Evian Championship in France on Saturday.
The world No.7 trails Celine Boutier by four shots entering the final round after the French local hope carded a 67 to retain the one-stroke lead she enjoyed at the halfway point of the tournament.
Japan's Nasa Hataoka is the only other player ahead of Lee after a third-round 68 pushed her to within three shots of Boutier at eight under.
Lee overcame a seven-shot final-round deficit in Evian-les-Bains two years ago to claim her maiden major title at the Evian Championship.
The 26-year-old only needs to make up four shots on Sunday to replicate that victory after mixing seven birdies with just two bogeys on Saturday to climb the leaderboard.
Lee shares third place with defending champion Brooke Henderson after the Canadian's third-round 67.
American world No.2 Nelly Korda is one stroke further back at six under after charging into contention with a 64, the only round better than Lee's.
Chasing a third major in three years after also winning the 2022 Women's US Open, Lee offset two early birdies on Saturday with successive bogeys on the fifth and sixth holes.
She rebounded with back-to-back birdies on seven and eight and picked up further shots on the 12th, 15th and 18th holes to be right in the mix for major No.3.
"Pretty solid," Lee said of her round.
"I feel like I've had something missing the first couple of days and then I still had two bogeys but I finished the front nine strong and had a good back nine.
"You could be a bit more aggressive today with the conditions - not much wind.
"I felt like it was coming together so hopefully I can keep the momentum going for tomorrow."
Steph Kyriacou is the next best Australian in a tie for 30th after clawing her way back to even par for the championship with a three-under 68.
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