But the 21 year old Northern Irishman responded with a six foot birdie putt on the short fourth and was out on his own in front again at 11 under par.
Both were in greenside bunkers for two at the long second, but although their recoveries each ran 15 feet past the hole, Day's came back down a slope to five feet.
And after McIlroy had to settle for a second successive par, his 23 year old playing partner - for the third day running - made no mistake.
McIlroy then did well to save par from short of the next green, but Day, round in a spectacular 64 on day two, holed from 12 feet to make it a tie.
Tiger Woods, meanwhile, fell five back when he had two bogeys and a birdie in the opening four-hole stretch.
That left Korean K J Choi, a rejuvinated Sergio Garcia and a charging Adam Scott - Day's compatriot, of course - in joint-third three behind.
On the 54th birthday of compatriot Seve Ballesteros, 30 year old Garcia, who has dipped from second to 73rd in the Official World Golf Ranking, birdied the second, third and fifth and turned in 33.
But Scott was going even better on the day. Also out in 33 he bogeyed the tenth, but then birdied the next and eagled the long 13th.
Woods was looking to pile on early pressure and prove his return to prominence was something of substance.
But instead he unluckily drove into a divot hole at the first, squirted his next shot out to the right and failed to salvage his four.
After failing to capitalise on the reachable par five next the four-time champion, down from first to seventh in the world after 17 months without a victory, did then come back with a 15 footer at the next, but he missed the fourth green and once again could not get up and down.
England's Luke Donald, trying to end the jinx that every winner of the eve-of-tournament par three competition has carried into the main event, joined Woods on six under with birdies at the first and eighth.
Last year's runner-up Lee Westwood was only one further back after two bogeys and two birdies in the first seven holes, while Scot Martin Laird - a debutant like Day - birdied the 11th, 13th and short 16th to climb to four under.
As for defending champion Phil Mickelson, he gave himself a chance to get back in the hunt from eight back overnight when he birdied the second and third, but he then bogeyed the next and the 11th and on two under again was only joint-31st.
McIlroy followed his birdie with a drive into sand on the 455 yard fifth. There was no way he could make the green and Day made him pay in dramatic fashion.
While McIlroy bogeyed - for only the second time all week - the Queenslander curled in the unlikeliest of 30 foot birdie putts up and over a huge ridge.
Day was the new leader at 11 under just as Donald had his third birdie of the round from 12 feet at the ninth and moved into a tie for third on seven under with Choi, Scott and South African Charl Schwartzel, but not Garcia, who bogeyed the tenth.
The pressure of leading appeared to tell on Day when he three-putted the sixth and then miscued his second to the next.
He bogeyed again and McIlroy could even have gone two ahead once more, but missed from seven feet.
Scott moved only two back in third with a 14 foot second putt for birdie at the long 15th, but handed the shot back immediately after straying into the bunker on the short 16th and only just getting out.
Westwood fell six back with a bogey on the ninth - he was out in 37 - and Fisher's bogeys there and at the 11th meant he was back down to two under with Poulter, who took six on the 15th in his 71.
Laird, though, came home in 34 for a second successive 69 and could not be ruled out of contention yet at four under.