But after a fine start, Ireland's Graeme McDowell dropped four shots late on to finish four shots behind Howell.
World number one and two Vijay Singh and Ernie Els will consider themselves still in contention despite being eight and six shots off the pace respectively.
Defending champion Lee Westwood is still in the hunt after finishing on eight-under but Padraig Harrington is struggling at two-over.
Ryder Cup star Howell secured his entry to three of next year's majors with a third-place finish in the WGC American Express Championship in Ireland last week. But the much-improved Englishman is looking to make it four by playing at Augusta and he went some way to achieving that goal with his second seven-under-par score.
Howell has not won since the Desert Classic in 1999 but he has reached 14-under as he prepares to tackle Carnoustie in his third round today.
"I don't think I will get into the (world's) top 15 or 20, but a place in the Masters is still up for grabs," said the 29-year-old.
"As soon as the Ryder Cup finished I set about trying to qualify for the majors and I jumped up the standings with a fourth-place finish last week. Hopefully I can have a great finish here and win this week which would set me up nicely for Augusta. That's something I really want to play in."
The pick of his round was an eagle two at the 18th after holing brilliantly with a sand wedge, but he insists that his five-year run without a title is not a burden.
A confident Howell added: "I am confident that I am going to win again - no doubt about it - and this will be a great place to start. But I am convinced I will win sooner rather than later."
His Ryder Cup team-mate Luke Donald is also riding high. The Englishman was just one shot behind after also taking advantage of the inviting old course with the same seven-under-par second-round score of 65.
They both go to Carnoustie, which is regarded as the toughest of the three courses, today and Donald hopes his form continues.
"I am very pleased because in the past I have not played that well in links golf," he said.
Countryman Jamie Donaldson was also in the hunt on 10 under par while Colin Montgomerie believes he will still have a say in the destination of the £3.6m jackpot. The Scot carded a five-under-par second-round score of 67 - again at St Andrews - but he too admits that he has had it easy so far.
Montgomerie has good memories of Carnoustie, which earned a reputation for being punishing when Paul Lawrie was a surprise Open winner, but he admits he will have to shoot a score to rival his course-record 64 there to keep his Dunhill Championship hopes alive.
"We are half way but what you have to remember is, as Luke rightly said, we have played the two easiest scoring courses so far at Kingsbarns and St Andrews," he said.
"It will be a difficult course tomorrow and I will need to score another four under at best to give myself a chance of winning."
Howell was also sitting proudly at the top of the team event with actor Samuel L Jackson on 20 under par.