In the women's tournament, Australia's Su Oh shared a one shot lead with South Korean teenager Yang Hyo-jin ahead of major winner Hannah Green.
Starting on the 10th, Australia's Herbert sunk six birdies to no bogeys before his sensational eagle propelled him into the outright lead at the second event of the DP World Tour's 2025 season.
He ended one clear of Rintaro Nakaro -- Japan's amateur champion in 2023 -- and American Ryggs Johnson, with 2022 British Open champion Smith a shot further back in a four-way tie.
The mixed Australian Open involves men and women teeing off in alternating groups on the same courses.
Kingston Heath in Melbourne's famous sandbelt region is the main venue across all four days with Victoria Golf Club also hosting play on the opening two days.
"I felt like there was a lot of shots left out there," said Herbert, a three-time winner on the European circuit, after negotiating soggy fairways and soft greens.
"I feel like that with every round of golf, to be fair, but didn't really think I holed that many. Just hit it quite nicely."
Nakaro was the early pacesetter with eight birdies, but his round was spoilt by a bogey at the last.
"I'm surprised but very happy," said the 21-year-old, who plans to turn professional next year.
Portrush places at stake
Smith, who finished second at last week's Australian PGA Championship, is yet to win an Australian Open and has made no secret of his desire to do so.
He was one-over after three, but then reeled off six straight birdies to remain in the hunt.
"I mean the greens are soft and there wasn't much wind out there this morning, so a lot of those par-fives played really quite short whereas typically you get one hole into the wind or something like that," he said.
"So yeah, I was just able to take advantage of that."
At stake for the men is a place at next year's British Open at Royal Portrush with the top three earning a spot.
Chilean defending champion Joaquin Niemann, Smith and Englishman Jordan Smith are already exempt.
Niemann, also on the LIV Tour, had a day to forget with 73 while Smith carded 70.
Australia's Su shot nine birdies in her 66 to lead the women's field alongside Yang, just 17.
But they have Green, a three-time winner on the LPGA Tour this year, breathing down their neck.
"I've worked really hard the last few months and felt like I was hitting the ball a lot better and just happy and proud," said Su.
South African defending champion Ashleigh Buhai struggled to 73 to be seven adrift.
