Runner-up in 2012 after a strong final round of 66, Ryu fired a five-under-par 67 on Saturday to lead on 12-under for three rounds at the hilly Namseoul Country Club on the outskirts of Seoul.
Overnight leader Kim Hyung-sung is a shot behind after bogeying the last hole in his round of 71.
Four more local golfers - Kang Kyung-nam, Lee Kyoung-hoon, Kim Do-hoon and reigning Korea Open champion Kim Dae-sub - share third place at nine-under.
Ryu mixed six birdies and a bogey in his penultimate round but said it had been a tough round.
"The greens were much faster today and some of the pin positions were very tricky," the 31-year-old said.
"I wasn't always in good position with my tee shots, but fortunately my short game was ok and I managed to make birdies."
The leaderboard featured only two non-Koreans in the top 15, with Australians Steve Jeffress and Jamie Arnold both at four-under for the tournament after carding matching 70s on Saturday. (Reporting by Amlan Chakraborty in New Delhi, editing by Peter Rutherford)