The German, who won his only European Tour title in 2004, fired a second consecutive 66 to be ten under par at Killarney Golf & Fishing Club.
First round leader Jeev Milkha Singh and Danish Ryder Cup star Søren Hansen are a shot further back, with Spain’s Ignacio Garrido fourth on eight under.
Late in the day Siem eagled the long 16th and sank a 25 foot birdie putt on the next to move one ahead of Singh and Hansen.
"There's two rounds to go - it's only half-time," he said after his 66. "I just want to stay calm and see what happens." His one previous victory was in South Africa seven seasons ago.
“It's a great venue here and I love that golf course, and the crowds we had here the first two rounds is perfect. If we had that every week, it would be great.”
In his first start since his dream Open Championship victory at Sandwich, Darren Clarke dropped four shots in the last eight holes for a 74 and a one over aggregate that saw him miss the cut.
Clarke admitted his mental energy levels were down after a bout of 'flu followed his post-Open celebrations.
"I just couldn't get anything going," he commented. "A weekend off is not what I wanted. It probably won't do me any harm, albeit I would much prefer to be here to play.
"A couple of things went my way over at Sandwich and here bounces went the other way. Payback time I suppose.
"I didn't have much time off after The Open, but that's no excuse for shooting 74."
While two of Ireland's four Major Champions will not be around for the weekend after Clarke and Padraig Harrington both missed the cut, Graeme McDowell and Rory McIlroy will spearhead the Irish challenge after rounds of 66 and 68 respectively.
US Open Champion McIlroy birdied the 14th, 15th and 16th holes to surge up the leaderboard.
He said: “I'm only six back going into the weekend so I have a great chance – we all know how much can happen in 36 holes so if I can get out there on Saturday and make a good start I really feel like I can post a number. To play in front of these crowds is phenomenal and that's one of the great things about the Irish Open, the crowds turn up in force, and it's really a great atmosphere to play in.”
McDowell posted six birdies in his round to join his compatriot on four under par, six shots behind Siem.
“The event has got exactly what it needs," he said. "It's got some sunshine, a great venue and massive crowds. Of course we are disappointed that Pádraig and Darren are not here for the weekend but myself, Rory and the rest of the Irish boys will try and make a great weekend of it and see if we can get a home winner.”
Singh led by two after an opening 63 that matched the lowest round of his career and, given he hit a wild opening drive into the stones beside Lough Leane, he settled for adding a 70.
But that allowed ex-Ryder Cup man Hansen to catch him with a 66, while defending champion Ross Fisher is among those on seven under and promising Irish amateur Paul Cutler stands six under after a 67.
“I played again sort of very, very similar round to yesterday,” said Hansen. “I just kept my head on very well. There was a few loose drives on the last nine holes, but hopefully I can sort that out by tomorrow, otherwise I played pretty good.”