The 43-year-old Alfredsson made four birdies on the front nine and five on the back at the Evian Royal Resort to beat the old course mark of 64 held by six players.
"This is my favorite stop on the Tour, period," the 1994 and '98 Evian winner said. "To have a course record is very special. I know the course so well and obviously love it here."
Five players are another shot back at 8 under - 2003 champion Juli Inkster, Cristie Kerr of the United States, South Korean duo Kim In-kyung and Meena Lee, and Candie Kung of Taiwan.
Overnight leader Lorena Ochoa is at 6 under after shooting a 1-over 73 following her 65 on Thursday.
Alfredsson, tied for 41st place overnight following a 72 on Thursday, moved to 8 under at the par-5 15th, but then missed birdie putts on the next two holes.
At the par-5 18th, her chip from a bunker landed seven feet from the flag to set up the last birdie. After making the putt, she pumped her fist and shared hugs with playing partners Sherri Steinhauer of the U.S. and Mhairi McKay of Scotland.
"I had a wonderful group," Alfredsson said. "We laughed a lot and talked a lot. You just play, you make a putt and move on."
The course record continues Alfredsson's revival after a 2007 season ruined by a back injury.
She was second in the U.S. Women's Open last month, finishing four strokes behind Inbee Park at Interlachen, Minnesota, and has climbed from 116th to No. 42 in the world rankings.
"I am healthy," she said. "I don't think I've been healthy for 15 years according to the doctors. Having gone through all the adversity you enjoy things in a different way at the end of your career."
Alfredsson will pair up with the 19-year-old Park in Saturday's third round.
"It's a great honor to have a chance to play with Helen," said Park, a Brazil-born Korean who became a United States citizen last month. "I know she played really well at the Open. I know we're going to have a lot of fun. She's a great person."
Park edged into the lead on 18 with a recovery shot to within a foot of the flag from the same bunker that Alfredsson found earlier. Park said she had to overcome early nerves playing alongside the top-ranked Ochoa, who three-putted the first green and made four bogeys in her round.