"You hit in on to the green and you have this humungous break," Ko said.
"It's tough in every aspect ... it does feel like a major."
While Ko will start raging favourite in the final round, South Korea's Amy Yang is in hot pursuit after a three-under 70 to be a shot back at six under.
Australia's Katherine Kirk posted six birdies for a three-under 70 in one of the rounds of the day to move to four-under alongside Paraguay's Julieta Granada.
South Korea's Ha Na Jang, who held the overnight lead with Ko and Jutanugarn, signed for a 76 to drop back to a share of sixth.
Defending champion Karrie Webb was out on course early and had an impressive round of two-under to be in a tie for 27th at three over.
Kirk, who finished second in last week's Ladies Masters on the Gold Coast, felt she couldn't have got any more out of her round.
Kirk said the greens were the toughest the women would have to compete on this year.
"I'm very happy with it because it's not easy to make birdies out there and I made six," Kirk said. "I made two long putts and they're just bonuses but that's probably as good as it gets today."
Ko said navigating Royal Melbourne's greens was so tough she predicted that 10-under would be enough to take the title on Sunday, particularly if the wind came up.
The best score of the third round was a four-under par 69 by Malaysia's Ilhee Lee, who would be in contention but for a shocking second round 82.
"Sometimes it's guess work so I think a couple under par would be good and that's going to be my goal," the 17-year-old said.
Ko said she felt a little frustrated about not being able to make more birdies.
With more hot temperatures forecast for Sunday Ko was asked if she'd take a 71 if offered.
"Yes, I would," she laughed.
"If I don't have to play in that heat and get a 71 I'd take it."
- AAP