Reed pulls four shots ahead with McIlroy 11 adrift at Dubai Desert Classic
The American is a three-time winner on the DP World Tour but will be looking for his first full-field title in the nine-million-dollar event.
Reed finished runner-up to McIlroy at the Majlis course of Emirates Golf Club in 2023 and inside the top-10 last year.
"You're always excited, showing up on Sunday with a lead," said the 35-year-old Reed, who shot a five-under par 67 to reach 14-under total.
"That's what I feel all of us players live for, to have a chance to win on Sundays and just battle out with all the guys. I know it's not going to be easy, it never is, and it doesn't matter how big of a lead you have.
"So, looking forward to tomorrow and just hopefully go out there and keep doing what I'm doing."
Spaniard David Puig was second at 10-under after a six-under par 66 with Norwegian Viktor Hovland, winner in 2022, moved into contention with a seven-under 65 that put him five shots behind the leader.
World number two and four-time Dubai champion McIlroy was tied 27th and 11 shots behind Reed at three-under after making just two birdies and a bogey in his 71.
Reed could have increased his lead, but his birdie attempts from the par-3 15th to the par-4 17th fell just short.
The American was delighted with the way he played, especially having started the round with a bogey.
"At the end, it was definitely a solid and good score. Early in the round, I just didn't really settle out there," said Reed, now ranked 44th in the world.
"The swing finally clicked when I hit a really good drive on the eighth, and from that point on, I felt like it was really solid and I had it locked in."
Puig, 24, is one of the hottest young stars in the game. He has already won on the DP World Tour this season –- at the Australian PGA Championship last December.
He started with three straight birdies, and made just one bogey against seven birdies.
Defending champion Tyrrell Hatton slipped to tied 42nd place after a disappointing 76.