Despite the windy conditions that made scoring difficult on Friday, the Australian shot a two-under-par 68 at Gleneagles Golf Course to post a nine-under 131 total through two rounds.
It was enough to extend the overnight leader's margin to three strokes from one, after shooting an opening 63 in the final PGA Tour Champions' major of the year.
Jerry Kelly (68) has sole possession of second place at six under, while Sweden's Henrik Stenson (68), Austria's Markus Brier (69) and South Africa's Ernie Els (71) are tied for third at four under.
Percy, 52, is halfway to his first career Champions Tour victory after a pair of playoff losses last year.
His last win of any kind - and the only one of his six that came on an America-based tour - was at the 2014 Price Cutter Charity Championship on the Web.com Tour.
"Obviously very happy. It's such a hard golf course," Percy said. "You've got to concentrate on every single shot.
"There's no easy holes or anything. You can lose your ball on every shot. That's what I like. It keeps me tuned in."
Percy seemed destined for a much worse second round when he was two over through eight holes. But he was bogey-free over the final 10 holes, notching birdies on Nos.9, 13, 14 and 18 to redeem the day.
"Yesterday I hit it everywhere I was looking, so it was pretty easy. Today was way harder trying to judge how much the wind would hit stuff," Percy said. "I got it around okay. That was the difference, I think."
Kelly had a more even-keel day, with a pair of birdies and a bogey on both the front and back nines.
"I had a good feel with my longer putts," Kelly said. "I certainly didn't hit it close. But some of the really, really good two-putts out there, using the slopes, and just trying to keep the ball in front of me, not do too much."
Australian Michael Wright shot a 72 to go with his opening 66. He is tied eighth at two under, one ahead of Steve Allan (69-70).
On a day where the scoring average was 73.8, England's Matthew Cort (67) posted the round of the day to surge into a tie for 14th at one under.
France's Lionel Alexandre was one shot back after the first round at six under before shooting a 73 on Friday to fall back into a tie for sixth.
Pat Perez, who was tied for third at five under after Thursday, shot a 75 and fell into a tie for 17th at even-par.
Charles Schwab Cup leader Stewart Cink, who won the first two Champions majors of the season, is tied for 46th at three over.
14°C