The world number three Ryu, bidding for her third successive major triumph after winning the PGA Championship and this month's Evian Championship, bogeyed her third hole and double-bogeyed the fifth to slip back.
But the South Korean responded superbly and was flawless after that with five birdies, including one on the 18th that gave her the outright lead heading into the weekend.
"I don't want to focus on other players. I will just keep thinking about my golf and the golf course," Ryu told reporters. "A lot of great players in here, so that's why I just want to think about my golf."
Japan's Shiho Kuwaki went out early and was the long-time clubhouse leader after carding a solid one-under 70 on a day marked by extremely slow play with the afternoon groups taking well over five hours.
Defending champion Miyu Yamashita was packing her bags after a quadruple bogey at the par-four 18th meant she missed the cut with a second-round 77.
Overnight leader Jeeno Thitikul of Thailand went round in nine more shots than her stunning first-round 64 as a two-over 73 left her tied with American Yealimi Noh, two shots off the lead, while Joo Soo-bin was a further two shots adrift and alone in fifth place.
"I didn't hit close to the pins as I did yesterday. Maybe the pin positions were kind of hard," Thitikul said by way of explanation for her relative struggle. "Just going to have to be patient at the weekend."
World number one Nelly Korda, like Ryu bidding for a third major this season, hit back after an opening-round 73 with a six-birdie 68 putting her in the mix for the weekend at one under along with 2024 champion Lydia Ko of New Zealand.
"Definitely better than yesterday," said Korda.
England's world number five Lottie Woad maintained her steady progress with a level-par 71 although a bogey at the 18th, only her third in two rounds, where she drove into a deep pot bunker, left her five shots adrift of Ryu.
Woad is trying to become the first home winner since Georgia Hall, also at Lytham, in 2018.
She was in a group of eight players packed together on two under, including compatriot Charley Hull.
Japan's Minami Katsu and American duo Lucy Li and Jing Yan are also on two under after all shooting three-under 68s.