Lowry, the 2019 British Open champion, fired nine birdies to lead China's Li Haotong and Danish pair Jacob Skov Olesen and Niklas Norgaard by three shots after two rounds at Donald Trump's Doonbeg resort in County Clare.
The only blemish for the Irishman came with a bogey on the par-four 13th, but he recovered to birdie the 15th and move to 11 under par.
"It was good fun out there," said Lowry, who revelled in the vocal home support.
"I got off to a nice start and then I just kept going. I felt great out there. Just kept my foot on the gas and tried to keep hitting good shots and keep holing putts and it was a nice day."
He added: "The crowds were amazing out there today. They support me along the way and it was nice to give them something to shout about."
Six-time major winner McIlroy struggled to find momentum in a second successive 69, despite a brilliant eagle at the eighth hole, and three-putted the final hole from close range to trail Lowry by nine shots.
The County Down native said his main emotion was frustration.
"I felt like I hit it well enough to shoot a low one, but I just couldn't get the putter going at all," he said.
"The last two days the greens have confused me a little bit, been struggling to read them, but I can hopefully turn it around tomorrow."
First-round leader Joaquin Niemann was five under for the tournament after a level-par 70, in a tie with four other golfers.
US President Trump is set to attend the tournament at the weekend during a two-day visit to Ireland.