Overnight leader Woods, looking to revitalise his career after two years blighted by personal problems and injury, opened the day with three successive bogeys on his way to a 75.
Senden, who won his home Open in 2006, carded an eagle and seven birdies - the last with a brilliant 30-foot putt at the 18th - to stand on 12-under for the tournament.
Day, Australia's top ranked golfer at number seven in the world, celebrated his 24th birthday with a round of 68 to stand a shot further back in second place.
Australian Greg Chalmers was third on 10-under after a 67, a shot better than compatriot Nick O'Hern (66) and American Nick Watney (68), who shared fourth.
The putter deserted 14-times major winner Woods as he foraged for birdies to stay in touch with the leaders in the middle of his round and an errant drive at the 11th had him slashing at the ground in frustration.
A bogey at that hole and another at the 12th after a foray into a bunker were mitigated by a birdie at the 14th but he finished the day six shots off the pace in a share of eighth.
"I couldn't get any momentum," the 35-year-old Woods said. "Any time I hit the golf ball in there stiff, I'd miss it and it kept happening again and again.
"If I take care of the par fives, play the easy holes well and make a couple of putts it's a one-two under par round and it doesn't seem that bad, but I made nothing today.
"I hit a couple of bad shots out there ... 75s are never exciting."
Woods is not yet out of the running for his first title in two years but it was a big step backwards after his first blemish-free round in nine months on Thursday and his first overnight lead of the year on Friday.
"I need to play good solid front nine and get some momentum going on the back nine then hopefully I can put myself into position, then I'll be right there," Woods added.
Day played steady par golf over the tricky first four holes before superb approach shots at the fifth and eighth resulted in birdies that gave him sole lead at the top of the leaderboard.
Better was to come at the ninth, where, roared on by a partisan gallery basking in the sunshine, he snaked a birdie putt fully 25 feet across the green and in to move to 10-under for the tournament at the turn.
Senden, meanwhile, had been playing with easy confidence after hitting a pitching wedge 100 metres to secure an eagle two at the sixth.
The Queenslander got back on terms with Day after a three-foot birdie putt at the 17th before his long putt at the last, as his younger compatriot found the water at the 14th, gave him the outright lead.
"It was a good day," said Senden, whose second place finish at the BMW Championship in September was not enough to secure him a place at next week's Presidents Cup in Melbourne.
"The goal was to stay in the moment and I think I did that well right until the end. Shooting nine-under is something you don't do very often so when you get it, you take it."
Day scrambled to a par to survive his watery excursion but bogeyed the 15th before his fifth birdie of the day on the 17th left him well placed in his quest for a first Australian Open title.
"I'm very happy with the position I'm in for tomorrow," said Day, who had not played in Australia for five years before this week.
"To be in the lead would be nice but I'm in the final group. It's been a while since I've been back so hopefully I can put on a good show for the crowds tomorrow."
