The 36 year old Welshman, hoping to earn a Ryder Cup debut on home soil at The Celtic Manor Resort in October, leads by three after a bogey free five under par effort.
After stretching his halfway advantage from one to four shots by going to the turn in 33 - helped by a 50 foot chip-in on the first - Dredge had that suddenly cut to one when England's Ross Fisher started for home birdie-eagle.
But Dredge responded with birdies on the 11th and 13th and parred in from there.
With 18 holes to play Dredge is 18 under par, while Fisher was joined on 15 under by Qualifying School graduate Simon Thornton, yet to have a top-ten finish on The European Tour.
Born in England but now an Irish passport holder, 33 year old Thornton had his third successive 67 while Fisher, gunning for a win that could lift him to seventh in The Ryder Cup table, shot 66 for the second day running.
Scotland's former Open Championship winner Paul Lawrie is one shot further back in fourth following a 68.
Dredge said: "It was not the prettiest, but my short game was good again and you've got to be happy with a 67 on the third day.
"I'll be keeping an eye on the board tomorrow and I hope I will be able to asses when to be aggressive or when I can play safe."
Fisher, though, warned: "I think I am capable of shooting very close to 60. I feel like there's a ridiculously low round in me."
He is looking for his first title since the Volvo World Match Play in Spain last November, but has had a quiet season so far and missed the cut at the US Open Championship last week.
He added: "This week is probably as good as I've hit it for a long time. It reminds me of when I breezed around Wentworth in 64 last year."
However, Dredge, who has had only one bogey in 54 holes so far, will draw strength from the fact that he went away from the field to win his two previous events by eight.
Thornton commented: "I'm just telling myself to stay in the present. I could shoot ten over tomorrow and it would all be a waste of time, but I hope I won't.
"Somebody said at the start that you'd take four 67s this week - and there's three of them. I've never been in the final group before and I'm looking forward to it."
He birdied the 16th and 17th to join Fisher, whereas playing partner Lawrie lost ground by finishing with six successive pars.
The final trio of Dredge, Fisher and Thornton tee-off just before 11am so that play finishes before the World Cup clash between Germany and England on the big screens at the course.