Yang fired her third consecutive five-under par 67 to stand on 15-under 201 after 54 holes at Blythefield Country Club in Belmont, Michigan.
The 33-year-old Orlando resident made seven birdies against two back-nine bogeys to take the top spot in search of her first victory on US soil.
"All day, all week, my ball striking has been really good so I was giving myself good chances out there," Yang said.
"I was a little bit off with putting speed. During the round I made a couple of mistakes, but I tried to stay patient and keep trying throughout the round."
Japan's Ayaka Furue, who began the day with a one-stroke edge, shared second on 202 with China's Lin Xiyu, seeking her first LPGA title, and South African Ashleigh Buhai, the reigning Women's British Open champion who won last week's LPGA ShopRite Classic. Buhai and Lin shot 66.
Yang, 33, is a three-time European Tour winner and four-time LPGA champion, her first coming in South Korea in 2013 and the other three coming in Thailand in 2015, 2017 and 2019.
She hopes to snap a four-year win drought ahead of her 69th attempt to win a major title in next week's Women's PGA Championship at Baltusrol.
"I'm always doing my best to win my first major," Yang said. "If I play good this week it will definitely give me a good confidence going into a major. I'm just going to keep trying."
Yang, fourth in April's Chevron Championship, had her best major results in runner-up showings at the 2012 and 2015 US Women's Opens.
Yang made birdies at the par-5 fourth, eighth and 10th as well as the par-4 sixth, but stumbled back with a bogey at the par-3 11th and 13th holes.
She answered with a birdie at the par-5 14th and then birdied 17 before completing a birdie sweep of the par-5s at 18 to seize the lead.
World number 17 Furue, an eight-time winner on the Japan Tour, won her only LPGA title at last year's Scottish Open but has five top-four finishes in her past nine events.
Furue birdied four of the first eight holes and had only one bogey for her first 48 holes before making three in the next five holes, undone by a 15-foot par putt miss at the par-3 13th and tee shots that hooked way left at 16 and 17 before a closing birdie gave her a 69 and a share of second.
Buhai followed her lone bogey at 17 with a closing eagle to share second while Lin opened and closed with birdies in a bogey-free round.
"Tried to keep everything simple and keep everything aggressive and I'm glad it pays off," Lin said.
