The 66-year-old Nelson had 6-under-par 66 on Friday to join Russ Cochran and Mark Mouland atop the leaderboard at Prestonwood.
“I hit the ball really well, so I was really, really pleased,” said Nelson, who last won on the Champions Tour in 2004. “For the most part, I hit it close to the hole. I shot 29 on the front side and missed it inside of 8 feet twice.
“So you shoot 29, you know that things are happening because it wasn’t a fluke. I didn’t hole out any 7-irons, I just hit the ball close.”
Faldo withdrew after 12 holes because of an elbow injury.
He tweaked a torn capsule in his left elbow when he made a gesture during a putt on No. 6. The six-time major champion was on the 13th tee at 1-over when he shook hands with playing partners Kenny Perry and Tom Kite and walked off the course.
“I really wanted to play. I was all geared up,” said Faldo, whose only other Champions Tour starts came in the Senior British Open. “I want to play good golf, but I can’t play with one arm.”
The 54-year-old Cochran, the 2010 winner, had an eagle and five birdies for a back-nine 30.
“To have a par 37 and shoot 7-under par on nine holes, you know you’re doing some good things,” Cochran said.
Augusta native and 1987 Masters Tournament champion Larry Mize shot 71. Former Augusta resident Allen Doyle had 84.
LPGA TOUR: In Kuala Lumpur, Malaysia, Ilhee Lee kept her lead in the LPGA Malaysia while 18-year-old Lexi Thompson shot 8-under 63 Friday and is one stroke behind after two rounds.
Lee, seeking her second title on the LPGA Tour, had 65 that left her at 13-under 129. She led by four early on, but Thompson surged on the back nine with four birdies around an eagle on the par-4 14th.
Last week’s Reignwood Classic champion, Shanshan Feng, whose caddie is Augusta native Mercer Leftwich III, also shot 65 and is 10-under. I.K. Kim (66) and Paula Creamer (67) are 9-under.
EUROPEAN TOUR: In Vilamoura, Portugal, Paul Waring shot 8-under-par 63 to tie for the lead with David Lynn and Hennie Otto after the second round of the Portugal Masters.
Otto had 64 and Lynn shot 65 for a 12-under total of 130.
Former Augusta State golfer Scott Jamieson followed an opening 66 with 73 and is at 139.
Bernd Wiesberger and Chris Doak are one stroke behind.
Lynn was one of seven golfers tied for the lead after the first round on the Oceanico Victoria Golf Course. He had a bogey-free round, including an eagle, to stay atop the crowded leaderboard.
Waring made eight birdies, while Otto finished with six birdies and an eagle to go with one bogey.
Waring is playing on a medical exemption after undergoing a wrist operation, but has finished in the top 10 at four tournaments since April.
“I’ve been playing better for the last few months,” Waring said. “I lost by one in Valencia, two in Gleneagles, been knocking on the door a few times, so it’s nice to keep myself in contention week on week.”
Defending champion Shane Lowry, Matteo Manassero and home player Ricardo Santos all missed the cut.