On a low-scoring day at Yas Links, the Englishman, seeking a first title on the European tour in five years, shot a third-round six-under 66 to move to 20-under par for the week in the next-to-last event of the 2025 season.
Smylie, who started the day tied for 10th, carded a second successive 68 to fix himself in a six-strong group sharing 12th place, including Rory McIlroy.
The 23-year-old, son of former Wimbledon tennis champion Liz Smylie, started the day well with three birdies in his first four holes.
But the Queensland left-hander, the only Australian in the field, hit a blip with a bogey at the par four 14th before recovering well with a brilliant birdie at the par-three 17th.
No. 2-ranked McIlroy, the leader of the season-long Race to Dubai standings, surged toward contention with six birdies in his first 11 holes but his round stalled and he posted a 66 to join Smylie on 14 under, six strokes off the lead.
Nicolai Hojgaard (65) and Tommy Fleetwood (67), the winner in 2017 and 2018 when the event was held at Abu Dhabi Golf Club, were tied for second place after Saturday's play while Nacho Elvira (65) was a shot further back.
Rai's second and most recent win on the European tour came in 2020 at the Scottish Open. The 30th-ranked player won the Wyndham Championship on the PGA Tour in August last year.
"This is one of the biggest events we have on the DP World Tour," Rai said.
"To win this week, to have a chance going into the weekend, is great. Still a long way to go and a lot of really good players."
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