England's Ross Fisher followed his opening round course record in the European Open with a 68 to take a one-shot lead on 13 under.
Fisher carded five birdies with Northern Ireland's Graeme McDowell one shot adrift after a 67.
Sergio Garcia leapt up the leaderboard with a 64, the best round of the day, and is now third on nine under.
Darren Clarke's hopes of playing in the Open took a blow when he missed the cut and was then disqualified.
Clarke signed for a four on the last instead of a five and must now finish in the top five at the Scottish Open at Loch Lomond next week if he is to qualify for Royal Birkdale.
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It was the Scot's 10th successive round under par and his lowest in Europe since the closing 65 which took him to the title at The K Club in Ireland 12 months ago.
Montgomerie's playing partner Ian Poulter also hit a 67 and is among a host of players, including Ireland's Paul McGinley, David Frost, Michael Jonzon and Montgomerie, tied for fifth on seven under.
The round of the day went to the world number eight Garcia, who finished with seven birdies and an eagle.
But the Spaniard was critical of his performance earlier on in the round and believed he was saved by an eagle-birdie finish in the last two holes.
"I am not happy with the way I played four, five and six," said the 28-year-old.
"I had a really good round going and my second shot on four from the middle of the fairway with a nine-iron became plugged in a bunker and a bogey stopped my momentum.
"Fortunately for me I had a great finish so that made up a little bit. The good thing is I got myself back in the tournament."
Meanwhile, overnight leader Fisher admitted it was an almost impossible task to follow up Thursday's nine-under-par 63, which broke the course record at The London Club held by Seve Ballesteros.
"My game didn't feel quite as sharp as it did on Thursday but I'm pretty pleased to be leading," said the 27-year-old.
"On Thursday everything went in. I took 23 putts, holed a bunker shot and holed a putt from off the green. It was always going to be difficult to repeat that."
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