Pearce made his move at the other Kiwis in the field slid backwards, with Michael Long and Gareth Paddison both shooting rounds of 74 to fall back into a tie for 30th at two-over for the tournament.
The other New Zealanders to make the cut are further off the pace, with Harry Bateman in a tie for 38th and Kieran Muir sharing 54th.
Pearce is tied alongside Adam Scott, who had the wheels fall off his Australian Masters charge with the tournament favourite producing a third-round shocker.
Scott started Saturday leading at eight-under but the close of play couldn't come quick enough as he posted a six-over 77, including bogeys on the two final holes.
With six golfers taking turns at the top of the leaderboard, Millar ended the day at seven-under after a three-under par round to sit one stroke clear of Sydney pro Andrew Evans, who had to play in qualifying for entry into the tournament on Monday.
Veteran Peter Senior, who won his last Masters in 1995, showed age was no barrier with a three under to share third with Michael Sim, John Senden and Matthew Guyatt.
The signs were ominous for the Scott, the 2012 and 2013 champion, when he opened with a bogey, although he immediately clawed it back with a birdie on the second.
But wayward tee-shots and erratic putting saw Scott add three lots of successive bogeys at six and seven, 10 and 11 and then the closing holes.
With only eight golfers under par in the third round, the former world No.1 is still a chance but only if he plays like he did on the opening day when he looked unbeatable with a 64.
Millar, who is a pro in Canberra, is 540 spots behind Scott on the world rankings but is in career-best form after recording eight top-10 finishes in 10 tournaments this year, including a win at the New Zealand PGA and a joint second place finish at last week's NSW Open.
In a strange twist Millar has been helping Evans with his swing, although he's unlikely to be doling out any tips when the pair tee off in the final group.
The 39-year-old said he'd had a "kick in the pants" when forced to keep his tour card through qualifying school after he won just $18,000 last year.
With his confidence riding high, he always felt he could challenge at Huntingdale which was something he dreamed of as a kid.
"This is probably a tournament that I've wanted to win," Millar said.
"In terms of Australian golf for me, I've grown up watching it here at Huntingdale.
"It would mean a hell of a lot."
With such a packed leaderboard Millar said he would have to deliver in the final round to win the gold jacket.
"I can't expect to turn up tomorrow and not play my best," he said.
"I'm going to have to play my best to win it, because no one's going to hand it to me.
"You've got guys like John Senden, Pete Senior - he's won a thousand titles - all these fellas are pretty hungry to have a crack as well."
- Additional reporting AAP
