Price made the halfway cut in Turin right on the mark of level par, but carded a third round 65 to set the early clubhouse target on seven under par alongside England's Richard McEvoy and Scotland's Richie Ramsay.
The Welshman memorably beat World Number Two Phil Mickelson in the singles at The Belfry in 2002, but has struggled recently and recorded just three top-ten finishes in the last five seasons on The European Tour.
The 43 year old from Pontypridd finished 198th on The Race to Dubai last year and kept his European Tour card courtesy of a place in the top 40 of the career money list, but looked to be rediscovering the form which brought him three European Tour titles at Royal Park I Roveri.
After birdies at the first, third, fifth and ninth took him to the turn in 32, Price rolled in a hat-trick of birdies from the 11th and registered his eighth of the day on the 15th to move into a share of the lead.
A bogey on the 17th was the only blemish on his card, but Price was still delighted to card a 65, his best round for three years.
"The way I have been playing recently I'm happy just to be playing well," Price admitted. "I've played more tournaments this year than I usually would and I'm working hard and it's nice to see some returns.
"I chipped in for birdie on the first and saved par on the second and then just got on a nice run. The course is there for the taking and I think there will be more low scores this afternoon but I'm in better shape than I have been for a long time."
Price, whose last tournament win came in the European Open in 2003, added: "I lost the appetite to do the work that you need to do. You think 'Do I really want to make the sacrifices?'
"But I did not expect to pay such a high price for taking my foot off the accelerator."
Low scoring was the order of the day and the later starters were also soon among the birdies.
Teenage prodigy Matteo Manassero, the 17 year old former amateur star making his professional debut on home soil, had carded three birdies and one bogey in his first six holes, coming within inches of a hole-in-one on the sixth.
At six under par he moved three behind then leader David Horsey, who had picked up four shots in his first five holes, with overnight leader Andersson Hed, Alejandro Cañizares and Nicolas Colsaerts a shot back on eight under.
Andersson Hed recovered from dropping a shot at the fourth with three birdies in the next four holes to regain the lead on 11 under par as he reached the turn.
Colsaerts and Miguel Angel Jiménez were a shot behind along with England's Chris Wood, who looked like taking over the lead in the clubhouse.
Wood, who finished fifth in The Open Championship as an amateur in 2008 and third as a professional a year later - just one shot outside the play-off - was seven under for his round and ten under overall with two holes to play.
Wood, who duly became the fourth player to card a 65 to set the new clubhouse target at ten under par, said: "I could have shot that score easily on the first two days as well.
"It was very frustrating, I gave myself so many chances and spent a good couple of hours on the putting green after yesterday's round. Today I felt like I could have birdied every hole."
Wood added that he would not mind being "a couple behind" going into the final round tomorrow, but it looked like being more than a couple as Andersson Hed and Jiménez improved to 13 under par with six holes remaining.