The Australian has been in the form of his life over the last two weeks and had the galleries at The Australian course purring when he crunched a nine-iron out of the pine-needle scrub to within two feet of the pin at the 18th.
The putt was never in doubt and Lee added a seven-under-par 64 to his opening round of 67 at the neighbouring Lakes course to move to 12-under for the tournament, three shots clear of Scot Connor Syme (70) and American Patrick Rodgers (70).
"It's always nice to make an eagle whenever, but on the last hole, it's even nicer," Lee told reporters after signing for six birdies, a bogey and the eagle.
"Sometimes you play good, sometimes you play bad and right now I'm playing good and I'm having fun. It's not many time we get to play out here in Australia and enjoy this type of crowd, so I'm soaking it all in."
The novel format of the Australian Open has men and women competing for their respective titles on the same layouts over two courses, although weekend play will be limited to The Australian.
Lee's older sister, double major winner Minjee, was playing in the group behind him on Friday and the whole family was at the course to cheer them on.
Minjee had a less successful day, shooting a three-over 75 to stand nine shots behind the women's tournament leader, South Korea's former world number one Shin Ji-yai.
"It's amazing just walking down the fairways looking back and seeing my sister," Lee said.
"I don't think she played overly that good today, but just to see her swing it and just be around in the present, it's really cool. We don't really get to hang out as a family."
Shin shot a four-under 68 at The Australian to finish two shots ahead of reigning champion Ashleigh Buhai of South Africa at the halfway stage of the women's event.
Joint overnight leader Rachel Lee, the 16-year-old amateur who only qualified for the event on Monday, endured a much tougher second round, plummeting down the leaderboard with a seven-over-par 79 to sit one-over heading into the third round.
Former British Open champion Cameron Smith played in the same group as Lee and stood eight shots off the pace after carding a three-under 68, a vast improvement on last week when he tearfully missed the cut at the Australian PGA.
There were still signs of his frustration at his form, though, and he angrily threw his ball into the water at the 17th after missing a short par putt.
"It was a lot better today and could have been way less, to be honest," he said.
"I did everything I needed to do today except hole the putts, which is really frustrating. Just need to go out there tomorrow and do much more of the same and hopefully hear some of those putts over 10 feet go in."
The other relatively recent Australian major winner in the men's field, former Masters champion Adam Scott, shot a four-under 68 at the Lakes and was also at four-under for the tournament alongside Smith heading into the weekend.
